Pricing

The pricing policy (including price management ) followed as a selling price policy mainly to set the selling policy goal with the help of the sale pricing incentives. An important decision problem is the reserve price. The price ceiling, however, is determined by demand. It is basically where the perceived by the customer price matches its appreciation of the product. Price policy shall be used as the purchase price policy for procurement policy objectives. Due to the prevalence of the manufacturers point of view in the marketing theory, which usually meant by customer consumers as buyers of the products advised both directed at business customers (sales) price policy as well as the purchasing or procurement price policy strategies and tactics easy to lose sight. The buyers of industrial products are usually first contractor and not consumers. In the latter mainly the (sales) price policy of the retail trade is directed; it is dedicated to retail marketing, as well as the directed to the commercial suppliers (purchase ) price policy. The pricing policy includes all measures to:

• Formation and changes in prices
• Pricing and differentiation of prices
• Setting sales conditions (conditions Management)
• Development of customer services.

Cost-oriented pricing policy or a price floor

In manufacturing companies the lower price limit on the variable costing or absorption costing, which, for example, take into account the production and material costs is based. It should be noted that at least the variable costs of the product, such as material costs, labor hours and energy consumption will be covered. This is the short-term price floor. In this case, the contribution margin is equal to zero. If both the variable and fixed costs (eg room rental, depreciation for machinery, storage areas ) covered by the price that is on the long-term price floor speech. The long- term price lower limit is the income threshold at which the total costs are covered and the profit is zero. With the cost-based pricing policy is thus not defined as the amount to be longing price, but it is the basis for deciding whether the production and / or distribution of goods worthwhile.

For trading companies, which calculate sales prices sometimes for thousands of items in stock, and may have to revise the short term, the problem is different. The trade can be either all the costs more accurately and precisely time each item attribute still exists the above short-term price floor. Even the cost price of a commodity, the imputed has a ripple effect and in which no more contribution margin is earned - in his below we speak colloquially of " loss articles" - may fall below the short term. Conditions for such a tactical rather than strategic pricing policies include Special offer, response to competitive prices, stock clearance or targeted " predatory " actions. Losses from articles without contribution margin (compensation takers ) must costed higher Articles ( balance beam ) can be compensated.

Market-oriented pricing policy or optimal pricing

The market-oriented pricing is based on both the prices of competing companies, as well as the behavior of customers. It usually has the goal of maximizing profits. There are exceptions, such as when a competitor out of the market or a new product to be introduced. To determine the profit-maximizing price, both the market structure ( monopoly, limited monopoly etc.) are considered, the behavior of competitors analyzed and an intensive marketing research must be operated.

This can lead to very different pricing strategies depending on the market. An important tool here is the price elasticity of demand and supply. General is to say that the (low ) price forms a " fake" preference (preference) for the customer. If the price rises, and is a cheaper competitor, the customer moves to the cheaper provider. Based on the price elasticity of demand can be determined the extent to which customers respond to different price changes. If the elasticity is low, the prices can be relatively highly varied without that customers react excessively, ie case of price increases migrate hardly customers. In this case, there is a "real" preference that causes the customer, the supplier concerned to remain faithful despite increased price.

The existence of preferences removes the uniformity of the market price. Buyers who prefer a certain brand, are willing to pay a higher price than comparable competitive services. The resulting award- policy space ( monopolistic area) is indicative of imperfect markets.

In the context of market-oriented price policy, the measurement of consumer willingness to pay plays an important role in price discovery.

Special cases and expansion

As special cases of the sales market- oriented price policy price discrimination and price bundling apply. After Heribert Meffert belongs to the pricing policy and the customized design of the performance and payment.

A special feature is the price policy in the trade; they do is basically sales and procurement market oriented. The pricing policy of the trade, unlike the industrial price policy, not regularly restricted to the optimal determination of the sales price of each item, but focused on the determination of cost and sales price of each item, and therefore tends to optimize the trade margins. Because of the many goods - services combinations of each range, a trading company to apply the so-called compensatory or mixed calculation, ie set on individual items, sales prices even below cost price, if a compensation by higher margins is done in other articles. This allows a trading company, at any time award politically to put competition pulses ( eg by special offers or compare prices) to respond to competitive prices (eg, predatory pricing or peaceful price adjustment ) and the award- strategic and tactical options trading psychology (eg Price Guarantee or Awakening price expectations ) exploit. Therefore, for a trading company, "the art of calculation " ( Schenk) less is to optimize purchasing and selling prices for each individual article, rather than in reaching an optimal price structure for the range.

Pricing strategies

Before a product is launched in the market, is to decide which pricing strategy is to be used for the product. A distinction between the fixed price strategy, price competitive strategy and pricing strategy sequence. The chosen pricing strategy is the foundation for the pricing policy of a company. It has a high impact on the elements of the marketing mix.

Fixed price strategy

• High-price strategy: The price is set at a high price level (also: high-price segment, possibly as a niche product among other products ). This can be caused for example by a desired quality leadership or a brand strategy.

• Low Price Strategy: The price is set at a low level. The reason for this is often in a targeted cost leadership. Other destinations can be to eliminate competition is to break the resistance of the customers purchase and use the price as a selling point, as well as new competitors to make it difficult to enter the market.

• Yield Management: The price is determined on the basis of a dynamic price discrimination model as a function of known demand functions. In addition to the levy maximum willingness to pay the yield management also serves to capacity control, eg with airlines.

Price competition strategy

The price competition strategies are similar to the fixed-price strategies. The difference is that here the price changes over time, but the order of the participants remains the same. That the price leader in comparison still the highest price etc..

• Price Guide: Price guide has the highest price in the relevant market and the largest market share.
• Price follower: Here, the price will be adjusted to the price leader constantly. However, the price of the price follower is slightly below of the price leader.
• Price Fighter: The price fighter has the lowest price in the relevant market (also called price leader ).

The price leadership, however, is the pursuit of the lowest price with a ruinous may low price strategy. So the price fighter achieved a price leader, not the price leader.

Price succession strategy

Here the price is changed according to plan over time. Two strategies can be distinguished:

• Harvesting strategy ( skimming pricing), in which a high initial price over time is successively reduced. This allows for each group of buyers the maximum price to be skimmed off, and so the development costs are amortized.
• Penetration strategy ( penetration pricing), in which a low initial price leads to strong sales growth and high market share. Later, this price may be fixed, lowered or raised. Due to the low prices competitors can be quenched ( creating a barrier to market entry ), whereby the subsequent price increase is possible.

A revolutionary Price succession strategy commercially developed Edgar A. Filene in his founded in 1909 in Boston department store, the "automatic markdown system". The price tag on each item contains the date of its setting in the sales area, the longer an item remains unsold, ie with increasing storage duration will be sale price ( and thus its trading range ) systematically reduced, first to 25 percent, then to 50 and finally to 75%. Simultaneously, the reduced products migrate to the basement, which is why this strategy is also called "Basement system".

Other design elements

For pricing policy also includes discounts, and indeed, any discounts selling price a political tool or as required rebates shopping cheap political tool. They are often used rather than "real" price reductions, since these are to make very difficult to reverse. Discounts For consideration of the customer be expected, and they may be limited in time. Examples are volume discounts, loyalty discounts, bonuses and performance discounts. This is also called non-linear pricing, as the price does not change linearly with the amount. Discounts do not constitute an award- policy tool, but a means of policy conditions. Discounts are interest deductions for non- use of trade credit or payment terms.

Trading companies have Schenk also has numerous opportunities psycho tactical and psycho strategic pricing policy. Examples: Price Presentation, Price optics, permanent low price, warranty price, price discrimination, cost-plus system, comparison price, preference to certain ending numbers, generate new or observing existing price expectations.