MKT402 Policies and Strategies Paper

Pricing Strategy Consulting Business

In this response you will get the answer of the following assignment :


Imagine that you work for a pricing strategy consulting business. Select a business that will be your next client.

 Write a six to eight (6-8) page paper in which you:

1. Create a scenario that would result in your client seeking advice from your consulting business.

2. Create a pricing policy for the selected client and scenario.

3. Analyze the best price setting process used to establish sustainable and profitable prices for the client.

4. Evaluate key pricing considerations and strategies relative to the product life cycle of your client’s three (3) top sellers.

5. Examine the challenges of effectively implementing a new or updated pricing strategy into the client that you selected.

6. Differentiate between incremental and avoidable costs for your client and analyze contribution margins.

7. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.

 Your assignment must follow these formatting requirements:

•Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.

•Include a cover page containing the title of the assignment, the student’s name, the professor’s name, and the date. The cover page and the reference page are not included in the required page length.

The specific course learning outcomes associated with this assignment are:

•Assess and create pricing policies for various purposes including price objections, price increases, economic downturn, and promotional pricing strategies.

•Analyze the price-setting process used to establish sustainable and profitable prices.

•Evaluate key pricing considerations and strategies relative to the product life cycle.

•Examine the challenges of effectively implementing pricing strategy into an organization.

•Differentiate between incremental and avoidable costs and analyze contribution margins.

•Use technology and information resources to research issues in strategic market pricing.

•Write clearly and concisely about strategic market pricing using proper writing mechanics.

Paper of the above Assignment

Introduction

To stay in present competitive marketplace, it is important for a firm to take effective and competitive decisions so that, competitors can be competed effectively and efficiently. In this way, pricing strategy or policy of the firm is also countered as one of the important elements that are helpful to increase competitiveness over the competitors (Berger, Grigoriev & Loon, 2008). Scenario for the paper is as follow:

Scenario:

The firm works as pricing strategy consulting business that helps the companies to set their prices to sustain the position of them along with increasing customer base. In the paper, firm that runs its retailing business in the competitive marketplace wants to establish its pricing strategy. For that, the firm takes advice from the consulting business so that it can operate successfully. It is because, as competition is increasing rapidly in the marketplace, it forces the retail firm to adopt and make use of effective pricing strategy so that, customers can be acquired and retained in long run (Wind & Mahajan, 2002). Setting right or appropriate pricing strategy also helps the firm to sustain profitability and customer base in the global market. So in this manner, the firm is seeking advice from best consulting firm to ensure the attainment of organizational goals and objectives. It is best opportunity for the consulting firm to give effective advices to the retail firm so that, customer base for both firms can become strong (Vinutha, 2011).

So, there will be discussion about the pricing strategy for the retail business. Best pricing setting process that may be used by the firm to establish sustainable and profitable prices for the client will be also discussed in the paper. Key consideration of the pricing strategy and strategies relative to the product life cycle of retail business’s three top sellers will be discussed along with defining challenges of implementing new or updated pricing strategy into the retail business.

Pricing Policy for Retail Business

Price refers to the money value or worth of the organizational products that are paid by the customers in against of the organizational products or services. In the global market, where competition is increasing rapidly and customers demand is increasing accordingly to get quality products at affordable cost, force over the firm to adopt effective and efficient pricing policies has been increased (Wind & Mahajan, 2002). So in this concern, while developing pricing policies for the retail firm various aspects are considered such as competitors’ price, customers’ taste and preferences, customers’ willingness to pay for the products and many more (Berger, Grigoriev & Loon, 2008).

It is because these elements will help to suggest suitable pricing strategy to the retail firm. So, before figuring out pricing strategy for the firm, costs associated with the products and operating expenses will be evaluated so that, margin for price can be set respectively (Gitman & McDaniel, 2008). In the cost of goods, amount paid for the product, plus any shipping or handling expenses are included. Similarly, operating cost includes expenses related to overhead, payroll, and marketing and office supplies. So, proposed pricing strategy will cover the cost of obtaining the goods plus expenses related to operating the business, for securing the profitability level of the firm (Covello & Hazelgren, 2006).

So, as per the scenario and retail business, competitive pricing strategy will be suggested to the firm. In this, products of the firm can be offered at competitive rate to the customers. It is because customers have wide choices to shop around to receive the best price (Vinutha, 2011). So, through using competitive pricing strategy the firm can provide outstanding customers products to stand above the competition. In starting, the firm can provide its products at the pricing below the competition and offering more quality. It is because offering products at low price along with maintaining quality will help the firm to attract the customers (Gitman & McDaniel, 2008).

It is because nowadays, customers are being concern about the quality and price of the products. So, use of such pricing strategy would be beneficial for the firm as it will ensure the increasing attention of the customers towards organizational products (Anderson, Jacobsen & Reid, 2002). In addition to this, it would be also beneficial for the firm to reduce cost of the organizational products along with adopting effective marketing strategies to focus on price specials. Furthermore, use of pricing below competition strategy will help the firm to raise demand among the customers (Berger, Grigoriev & Loon, 2008). It is because through assessing manufacturer suggested retail price, management of firm can avoid price wars. It would offer benefits to the company in terms of offering products to the customers as per the willingness of the customers and as per their life style and standards (Anderson, Jacobsen & Reid, 2002).

So, through knowing customers behavior and identifying competitors’ price, the firm can gain advantage of competitive pricing strategy. In addition of this, at the point of starting business or competing with the competitors, retailer can use discount offers as a part of the pricing policy (Gitman & McDaniel, 2008). As time passes or business is set in terms of attaining brand image and strong customer base, the firm can increase price of its products to increase profitability level (Covello & Hazelgren, 2006). So, in this way, through looking towards demand of the products, such step can be taken by the firm.

Pricing Setting Process

While setting the price of the organizational product, following steps will be followed:

Selecting the Price objective:

Before developing or implementing pricing strategy, price objective will be prepared so that, business can run into positive direction. In this, first objective will be related to the survival of product in the market that can be achieved through offering products at minimum price. Second objective will be related to increasing the profitability of the firm. Another objective is related to increase sales and market share of the company (Carson, Gilmore, Cummins, O’Donnell & Grant, 1998).

Determination of Demand:

Aim of this step is to evaluate whether price is best for increasing demand or not. For this, demand curve will be created to record the data about sales of the company in concern of the demand. Demand elasticity will also be calculated in this step to recognize the demand as an impact of increasing or decreasing price (Berger, Grigoriev & Loon, 2008).

Estimation of Cost:

In this step, variable and fixed cost will be estimated to assess the cost of the products.  Similarly, differential cost in different markets will also be calculated in this step. Targeting cost on the basis of organizational expenses will also be calculated along with identifying competitor’s price (Carson, Gilmore, Cummins, O’Donnell & Grant, 1998).

Select a Good Price Method:

In this step, price will be mark-upped through using sufficient data about organizational sales and demand of the products. Perceived value price would be also calculated in this step that will be estimated on the basis of cost of market mix and margin (Hinterhuber & Liozu, 2013).

Select Final Price:

On the basis of analysis of above five stages, final price of the product will be estimated and suggested to the retail firm. So that, the firm can use this price for attracting customers and increase sales and profitability level of the firm (Hinterhuber & Liozu, 2013).

Key Pricing Consideration

While finalizing price of the product, various key consideration will be followed so that chances of success of the organizational pricing strategy can be ensured. In this, as per the organizational top sellers, sufficient margin will be left so, they can earn sufficient margin for selling the organizational products. It is because these sellers would be part of the product life cycle of the organizational product those are important part of the organizational decision related to the setting of price (Carson, Gilmore, Cummins, O’Donnell & Grant, 1998). It is because as a part of the product life cycle of the product, top three sellers wholesaler, suppliers and shopkeepers are important to maintain link between the steps of the product life cycle, those are also important part of the organizational success and growth. So, secure the margin of sellers while finalizing the price of the product is also considered as consideration of the pricing strategy (Stark, 2007).

It is because economic conditions influence customers’ perception and buying behavior towards purchasing so these will be took into account while preparing pricing strategy. Additionally, current trends, quality and accessibility of the products will be also evaluated while preparing price of the products. It is because these considerations also influence to the sales and profitability of the firm due to being reason of customer switch (Hinterhuber & Liozu, 2013). Additionally, competitors’ pricing strategy will be also evaluated to measure the competence and quickness of them towards changing business environment and customers’ preferences. So, expect these considerations, life cycle cost of the products, logistic cost and related cost will be considered to adopt and implement effective and sufficient pricing strategy from the organizational concern (Carson, Gilmore, Cummins, O’Donnell & Grant, 1998).

Challenges in Implementation of new Pricing Strategy

While implementing new or updated pricing strategy into retail business, several challenges can be faced by the management. In this, firstly the firm may face challenge related to the acceptance of the new strategy by the employees (Angeles & Nath, 2007). It is because changes in the strategy may support to the shift in roles and responsibilities of the employees that may be a reason of resistance by them. In addition of this, assessing exact value of the organizational products and relevant price is also a challenging situation for the firm while implementing pricing strategy (Stark, 2007).

It is because there are various factors available those may create variation between expected value and exact value of the products. It may also work as a challenge for the firm while implementing new or updated pricing strategy. Furthermore, it is not an easy task for the firm to implement change in pricing strategies (Hinterhuber & Liozu, 2013). Various changes are required in the organizational strategies and action plans so that, execution of the pricing strategy can be supported. Similarly, changes in operational activities would be also required to implement the changes in pricing strategies that may also create problem for the firm while implementing new or updated pricing strategy (Angeles & Nath, 2007). Furthermore, use of available and planned strategy is also typical. It is because trends and customers’ perceptions are changing rapidly that may affect to the pricing strategy of the firm and may be reason of failure of the pricing strategy.

Conclusion

On the basis of above discussion, it can be inferred that pricing strategy plays a crucial role in increasing and decreasing customer base of any firm. It is because; it influences the customers’ interest and willingness to buy a product. It can be also inferred that while finalizing pricing strategies for a firm, various concerns are considered by the firms as competitors’ price, operational cost, expenses, and many more.

References

Anderson, M.E., Jacobsen, L.R. & Reid, G. (2002). Profiles in Small Business: A Competitive Strategy Approach. London: Routledge.

Angeles, R & Nath, R. (2007). Business-to-business e-procurement: success factors and challenges to implementation. Supply Chain Management: An International Journal, 12(2), 104-115.

Berger, A., Grigoriev, A & Loon, J. V. (2008). Price Strategy Implementation. Retrieved from http://arno.unimaas.nl/show.cgi?fid=14235

Carson, D., Gilmore, A., Cummins, A., O’Donnell, A & Grant, K. (1998). Price setting in SMEs: some empirical findings. Journal of Product & Brand Management, 7(1), 74-86.

Covello, J.A. & Hazelgren, B.J. (2006). Complete Book of Business Plans: Simple Steps to Writing Powerful Business Plans. USA: Sourcebooks, Inc.

Gitman, L.J. & McDaniel, C.D. (2008). The Future of Business: The Essentials. USA: Cengage Learning.

Hinterhuber, A & Liozu, S. (2013). Innovation in Pricing: Contemporary Theories and Best Practices. USA: Taylor & Francis.

Stark, J. (2007). Global Product: Strategy, Product Lifecycle Management and the Billion Customer Question. Germany: Springer.

Vinutha, S. (2011). Retailer Pricing Strategies. Retrieved from http://www.fibre2fashion.com/industry-article/38/3714/retailer-pricing-strategies1.asp

Wind, J & Mahajan, V. (2002). Digital Marketing: Global Strategies from the World's Leading Experts. USA: John Wiley & Sons.