Blog 8- Is the Price Right?

Many people relate successful marketing campaigns with funny advertisements and memorable promotion techniques.  Through funny advertisements are great for a marketing campaign, a good pricing strategy is essential for a company to be successful and make a profit on their product or service.   There are many strategies marketers can use to come to a final price.  Two very common ways to go about a pricing strategy for companies is through demand-oriented approaches or cost- oriented approaches. 

Demand- oriented pricing strategies examine what consumers tastes and preferences are and coming up with a price that will satisfy those tastes and preferences.  One pricing strategy many marketers use is price skimming.  Price skimming is when a company will set an initial high on the product because of the fact that customers are still willing to pay a high price.  That is why many times when a new product hits the market; the company will set the price high cause consumers still want to buy the product no matter what.  One example is the PS4 and the X-Box One.  Since these are still fairly new gaming consuls and the demand for them is very high right now, they are able set PS4’s and X-Box One’s at a high price because despite these products being expensive, consumers still want it.  Another pricing strategy marketer’s use is penetration pricing.  Penetration pricing is a strategy of setting a low initial price on a product to get consumers to want to but their product.  One corporation who uses penetration pricing on all their products is Wall-Mart.  Wall-Mart’s low prices gives consumers an incentive to want to go to a Wall-Mart and score big on a bunch of products for very cheap.  A third demand-oriented pricing strategy that is used frequently with luxury products is prestige pricing.  Prestige pricing is a strategy of setting a high price on a product to attract consumers who desire the highest quality product available on the market.  One example of prestige pricing is Rolex and how their watches are very expensive yet consumers who are status- =conscious will still be willing to purchase their watches because they know they have the most expensive and high quality watch a consumer can get. 

Cost-oriented pricing strategies are concerned with production and marketing costs of a corporation and making sure the final price that is set will cover expenses, overhead, and profit.  An example of a cost- orientated pricing strategy is standard markup pricing.  Standard markup pricing entails adding a fixed percentage to all products in order to ensure a profit gain.  An example of corporations that would use standard markup pricing are grocery stores.  Since grocery stores have so many products they cannot determine the demand for all the products they have.  Therefore by putting a fixed percentage on all the products in a grocery store profit will be made. 

The main goal for any corporation is to gain profit and come out on top against competitors in the market.  Therefore coming up with a successful pricing strategy is one of the best ways to ensure those goals.  However coming up with the perfect price isn’t always easy.  I have found that in our practice marketing simulation, coming up with a price for our backpack has been one of the hardest decisions our company has had to make.  However when a company arrives at the perfect price, it can make all the difference and will result in a successful and profitable product or service.