Pricing as a Critical Aspect in Marketing Research (Essay Sample)

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Pricing Strategies
Pricing is one of vital elements of an organization’s marketing mix strategy since it is said to have a direct influence on a firm’s sales volume, its market share, and its relationship with customers. From a general marketing perspective, a price cut may have a positive impact on a firm’s sales. Since it is generally assumed that consumers are rational, a price is said to be a key factor that can make customer demand more of a firm’s product or service. However, it should be noted that a price cut may not necessarily have a positive effect on a company. From the perspective of consumer behavior, research had indicated that a reduction in price may make a firm not only lose its revenue per unit (in absolute terms) but also the demand for its product or service. For instance, a reduction in price may tend to lower a company’s reputation. Here, it is argued that customer’s may perceive such as reduction in price as primarily arising from a reduction the quality of the company’s products or services. In addition, the customer’s relationship may deteriorate since some customers may believe that the company has previously been overcharging them. This, in fact, may have a negative effect on the current customer base of the company. Further, a price cut may equally force the company’s rivals to trim down the price of their products too, thus leading to a price war. This may, in long-run, have a negative effect on the company’s revenue size.
A direct price cut such as promotional/penetration pricing may be unhealthy to a company, in some cases. Therefore, instead of adopting a direct price cut, a business should opt to adopt a number of price-adjustments that are available. One of the price-adjustment strategies, in fact, could be the use of discount and allowance pricing (Sumathi and Saravanavel 324). Evidence reveals that today, most companies tend to offer bonuses and discounts in an attempt to reward their customers. Discounts often take the form of quantity discount, off-discount, the discount season, and cash discount. The above forms of discounts are aimed at reducing the company’s perceived product prices in the eyes of its customers. Segmented pricing is another strategic that the company may equally find to be beneficial as a direct alternative to a direct price cut.
Largely regarded as price discrimination, segmented pricing may entail charging distinct prices to customers based on the type of customers, their geographical location, and the type of products being sold. Equally, the firm can adopt psychological pricing. This form of pricing has to do with the manner in which consumers perceive a change in the pr...