The pricing policy Essay
The pricing policy that my business has chosen is a reflection of the market of which I am aiming at. If the prices of my Haribos are not right, costumers will buy rival product as consumers have a fair idea of what is the correct price for a product. Also this could end up in resulting of lost revenue which can also be lost if price is too low. For my pricing I need a balance between sales and revenue. An understanding of pricing elasticity of demand will help my business to make correct decisions as pricing involves a balance between being competitive and being profitable.
Some of the pricing strategies I will use will for Haribos include competitive pricing, which is where products are very similar and there is a lot of competition. I will not be able to charge significantly more or significantly less than market rivals. The price I will charge will therefore be very close to that charged by my rivals and competition will tend to be “non price” competition. My rivals are Rowntrees, mints, Also I will use promotional pricing.
This will be a short term pricing strategy which will help generate sales which will lead to
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Creaming or skimming is another pricing strategy but will not be relevant to my product as my product will not be set at an initial high price in order to take advantage of that segment of the market that is willing to pay to be ‘the first’ with the product then the price will slowly decrease as more products come out in the same market. As my product is not a generally a brand new product but an much improved version of Haribos also as it will be set at one price this pricing strategy will not appeal to my product.
There is also a pricing strategy which is psychological point pricing. This could help me as it adds a price tactic where I try to make goods and services sound cheaper then they really are e. g. : i?? 9. 99 sounds a lot less then i?? 10. 00. A lot of company’s use this strategy as they finish in 99 penetration price, this is a price that is set lower than that of competitors so that a firm can gain a foothold in the market for example, my company may offer discounts and cheaper prices to new customers. Even though these may be eroded, customer may stay loyal to the company.
Once a business has established a market share through penetration pricing, they are likely to keep it. But this price strategy is not relevant to my product is a good reputation brand which already has a foothold in the market. This strategy applies more to building societies, banking, gas, water electricity and telecommunication with people reluctant to move from one service to another. Undercutting is called predatory or destroyer pricing. A firm deliberately undercuts a rival’s price with the intention of driving that rival out of business.
The success of failure of the strategy depends on which firm can best carry the losses. I will not want to use this pricing strategy as I will be using competitive pricing which will be having similar prices to my rivals. This strategy is a risky strategy. This could cost the company a lot of money trying to see who can carry the most losses. Another pricing strategy is loss leaders which I would not like to choose for my pack of Haribos as the price of a loss leader is set lower than the total average cost of producing the product.
This pricing strategy is mainly for companies who sell various products as they use this pricing technique because they expect losses made on the loss leader to be more than compensated for by extra profits on other products. So this strategy will no be relevant to my company as I would not to make a loss and hoping I make some extra profit this strategy appeals to bigger firms. The demand curve for business Business need to understand how the demand for a product can effect that they price that they can charge for it. This relationship can be shown by a demand schedule and a demand schedule and a demand curve.
For the most products the relationship between demand and prise is opposite. As the price goes up, the quantity demand goes up. So the demand curve will rise price will lead to a fall in the quantity demand curve. Some demand curves are different for various products. Some appeal to wealthy people such as ‘prestige’ perfumes. A low price could put off consumers of perfumes. A low price could put off consumers of such a product, given the link made between a higher price and high quality. This means that the quantity demanded over lower prices may increase as price rises for such product.