Pricing strategies

Pricing decisions are generally the most difficult (and potentially the most important) that managers have to make because:-

• The interaction between consumers, trade and competitors is complex and somewhat volatile.
• They often have to be made quickly, without time for testing the potential results.
• They invariably have a direct effect on profit.
• Price is the only element of the marketing mix that generates revenue
• Price is still the principal determinant of consumer choice in many markets
• The practice of pricing is extremely complex and required great quantities of information that might be difficult to obtain.
• Unanticipated shifts by competitors may wreak havoc
• There is not certainty about how competitors will react to strategic pricing decisions or how purchasers will react.

As a result:

• there is a lot of intuition applied to pricing decisions.
• there are many mistakes made
• few organisations handle it well