Pricing Strategies Essay Example | Topics and Well Written Essays - 750 words

Pricing Strategies - Essay ExampleCompetition-establish pricing would allow the ZC gemstone to enter the market at a known acceptable price. It would provide the flexibility to offer prices at or slightly below the competitors. This would decease the need for market research. It would also gain immediate market share from the competition upon set of the product.Competition-based pricing would also tie the price to the overall market. That would benefit the company by taking advantage of increased profits when the market went up and continue to sell as the overall market dropped. Because the product does offer a unique quality advantage, ZC could be priced slightly high than the competition. However, Finlay et al. (1996) warns, ... consumers may easily impound products which are overpriced and disregard them in their buying decision reservation process (p.73).When using a competition-based pricing strategy, there needs to be considerations do for cost and survivability. If the price is set below the competitions lowest price, it may be below the cost of manufacturing it. It should be noted that in a competition based pricing strategy, the price provide be set by the least sophisticated or most aggressive competitor (Docters 2003 p.18). In an attempt to eliminate the competition, it may drive ZC out of business. However, since the seller also manufactures the item, cost reduction and control could return the product to profitability. Another drawback in this scenario for pricing based on the competition is that the consumer will connect the quality to the price. Since ZC is a higher quality item, we may not want it to be priced at or lower than correspondent items of less quality. A lower price may give an indication to the market that it is of lower quality. This psychological barrier may be hard to bounce back on an infomercial or through advertising. Since the product launch is on a televised home-shopping network in the United States, its imperativ e that the initial offering be received positively. This will allow ZC to continue and go global. If the ZC Company has adequate resources, they may be able to tolerate cutthroat pricing while making a minimal profit with the objective being long-term expansion. With expansion and increased international sales, production costs will drop and profits will again begin to rise.The other strategy to consider would be perceived-value pricing. This strategy would be the most effective at setting the price for maximum profits. ground a higher price based on the uniqueness of the product could offer a sizable competitive advantage. By using premium pricing, it would disunite the product and set it apart from the competition. This would increase demand and ingrain the price upward. According to Docters (2003), ... price alone can influence that demand or move the product into a new demand category (114). A higher price would also add to the consumers perception of quality. A study reporte d by Maxwell (2005) concluded, ... consumer price-quality perceptions were strongly related to their estimates of the price level of the product category (358). Price is often the indicator that the consumer uses to gauge quality. By setting a higher price we are gaining perceived brand quality.Another advantage of perceived-value