The Land of Technology

Pricing has traditionally been considered a me-too variable in marketing strategy. The stable economic conditions that prevailed during the 1960s may be particularly responsible for the low status ascribed to the pricing variable. Strategically, the function of pricing has been to provide adequate return on investment. Thus, the timeworn cost-plus method of pricing and its sophisticated version, return-on investment pricing, have historically been the basis for arriving at price. In the 1970s, however, a variety of events gave a new twist to the task of making pricing
decisions. Double-digit inflation, material shortages, the high cost of money, consumerism, and Post-price controls behavior all made pricing important. Since then pricing continues to play a key role in formulating marketing strategy.

Contempt the importance attached to it, good pricing is not an easy task,even under the most favorable conditions. A large number of internal and external variables must be studied consistently before price can be set. For example,
the reactions of a competitor often stand out as an important consideration in developing pricing strategy. Simply knowing that a competitor has a lower price is insufficient; a price strategist must know how much flexibility a competitor has in further lowering price. This presupposes a knowledge of the competitor’s cost structure. In the dynamics of today’s environment, however, where unexpected economic changes can render cost and revenue projections obsolete as soon as they are developed, pricing strategy is much more difficult to formulate.

Tags: Pricing