Fergana polytechnical institute faculty management in production department "economy" methodological instruction

Lesson number 7. Price policy.
Issues for discussion
1.1The concept of price and its essence.
1.2Pricing goals.
1.3Types of prices in marketing.
1.4.Price structure.
Types of pricing policy. Development of a corporate pricing strategy. Price discounts. Volatility and volatility of prices during the "life cycle" of the product. Factors affecting prices.
Key concepts:
Pricing policy in marketing, like product policy, consists of two interrelated components - pricing policy and price management policy. The pricing policy consists in setting the marginal price for the product, as well as its positioning within the chosen price category (price level).
The development of a pricing policy is preceded by a comprehensive study of the market and its capabilities, the definition of a promising set of goods (services), which is specified by the company. Then the economic conditions for entering the market are worked out, based on production costs and estimated profit, the producer price is determined. The next stage of pricing policy in marketing is the formation of the market entry price, due to the situation in this target market (markets) by the time the goods are sold. The value of the price set is influenced by both internal factors of the company (marketing goals, goals and strategies for implementing individual elements of the marketing mix, etc.) and external factors (type of market; assessment of the relationship between the price and value of the product carried out by the consumer; competition; economic situation possible reaction of intermediaries, state regulation of prices, etc.). Prices are closely related to other marketing and firm performance variables. Prices fluctuate frequently over the life cycle of a product, from high prices to attract prestige-oriented innovators to low prices aimed at the mass market.
There are three pricing methods:
1. cost-based method,
2. based on the opinion of buyers (buyer-based method) and
3. based on competitors' prices (competition-based method).
The simplest is the cost-based method, where the price is set by simply adding certain mark-ups to the cost of the product. The key to pricing based on customer feedback is the perceived value of the product, not the cost. Ultimately, whether the price is right or not is up to the consumer. Pricing begins with identifying needs and assessing the relationship between price and product value. Guided by the so-called reference prices, the buyer determines his choice by comparing consumer properties and prices of various goods of the same type. The application of this method is based on experience, intuition, good knowledge of the psychology of buyers, and market testing results.
Pricing based on competitors' prices (competitive pricing) has two main varieties: setting current prices for the company's products, taking into account the existing prices of competitors, and setting prices for contracts and contracts that are beneficial for the company when competing for them, based on one's idea of ​​​​the possible prices of competitors. Distinguish between prices for an individual product and for a set of products. In the latter case, the firm seeks to set prices that increase total profits using the following pricing strategies:
a) setting prices for different products of the same product line, taking into account differences in their cost, assessments of their properties by buyers and competitors' prices;
b) the simultaneous pricing of both the main product and complementary or auxiliary products, for example, a cheap car is understaffed for an additional price with certain accessories;
c) setting a low price for the main product and an inflated price for the obligatory accompanying product - "attractive pricing"; d) setting an extremely low, unprofitable price for low-value by-products, which makes it possible to reduce the price of the main product as well;
e) package pricing, when the seller combines several products, offering them at a reduced total price.
There are also prices for different stages of the product life cycle. So, a special approach requires determining the price of a new product. If the new product is a genuine novelty protected by a patent, then the firm can choose between a skimming price and a penetration price. In the first approach, a high price is set for a new product, bringing high profits from consumers willing to pay this price; the firm carries out not so volume, but profitable sales. This campaign can be used in the following cases: a) high quality of the product and its image; b) the small size of the production of the product does not cause high production costs; c) there is no opportunity for competitors to enter the market selling this product at lower prices. In the second approach, a new product is priced low enough to attract many buyers and gain significant market share. The application of such an approach is possible in the following cases: a) the market is highly sensitive to price, and a low price contributes to its expansion; b) with an increase in sales, production costs and costs in the distribution system are reduced; low price is unattractive to competitors. If the new product is not fundamentally new, but imitates existing ones, the price is determined taking into account the quality and price of the market leader's product. Here you can choose from different pricing strategies.
Based on the foregoing, we can distinguish the following factors that affect the pricing process in marketing - this is the ratio of supply and demand; product competitiveness; degree of competition in the market; product life cycle stages; state regulation measures; inflationary processes in the country; political events; psychological factors, the influence of consumers, the availability of distribution channels, the level of costs, etc.
The main targets of pricing policy in marketing are profit maximization, market consolidation, stable increase in sales and profit mass, and improvement of competition conditions. Specific tools such policies are the necessary price flexibility, judicious use of price premiums and discounts.
The essence of a targeted pricing policy in marketing is to set the company's products such prices and so vary them depending on the position on the market in order to seize a certain share of it, ensure the planned amount of profit and solve other strategic and operational tasks.