Pricing Decision Essay

Companies in their endeavor to succeed in the highly competitive and dynamic market ar now considering a clear focus on their marketing strategies. This is in order that they may remain relevant in the fast changing headache environment, market conditions and consumer preferences. It is important that a company considers the effects of the changes in the business environment including damage variations initiated by its competitors This is best done by first analyzing the costs offered by the competitors visa vie the companys cost structure and the competitors chances to change in response to the companys new price offers (Kotler 2003.p 66). Pricing Strategies The company needs to figure out the best system to implement in order to achieve the optimum prices for its products. To initiate cost-cutting with a view to improve on the profitability of the company the company must have an understanding of the type of cost that it needs to manage. This will be to a large extent influence d by its style of management, sources of professional advice, the broader vision of the companys goals, communication strategy, and companys capitalization in relation to debt-equity proportion and the cost of borrowing (Sherman 2007. p 3-4).The company also needs to understand the several types of costs that it incurs. The various types of costs are research and development costs, the overheads and administrative costs, human capital costs including health care costs, salaries and employee benefits, infrastructure and system costs, advertising and promotional costs, fixed and variable costs, and debt-servicing costs. The bottom line is to thoroughly educe across each of these cost categories and weigh their importance to the companys business operations, consider more efficient available alternatives, and the possible implications of the cost reduction strategy (Sherman 2007.p5 &9). A company such as Wal-Mart that has for years been ahead of its competitors by offering the lowest prices for its goods. Wal-Mart is able to manage favorable price cuts by implementing price cut strategies such as endeavoring to reduce its costs by pursuing a tax reduction strategy. This has been through its investments in Real Estate enthronement Trusts (REITs) in order to exploit tax loopholes and avoid some of the taxes levied in particular states (Moore 2007. p. 2). Having accomplished the above cost reduction strategy, the company may the come up with appropriate pricing for its products.This is done by first understanding pricing modes. There are six pricing methods that would lead to an informed determination in fixing prices. These are markup pricing method, the target return pricing method, perceived value method of pricing, value based pricing, the going-rate method of pricing and the sealed-bid method of pricing (Kotler 2003. p 66). Implications of Price Cuts and Conclusion The price of the product or service is a major factor that influences customers purchase en d is the marketing mix.A combination of the cost reduction strategy and an appropriate pricing strategy is more likely to benefit the company and enable it clear a competitive advantage over its competitors. By adopting market responsive cost cutting strategies in the communication industry, companies in turn helped create a better way of life whereby customers are now able to communicate more often and at lower prices Salazar 2007. p. 1). This translates to increased profits to the service providers as they are able to sell more units than before. References Kotler, P. (2003). Marketing Management. 11th Ed.New Jersey Prentice Hall. Moore, M. (2007). Taxing Strategies Always Cutting Prices, Wal-Mart Attempts to Rollback Taxes. Retrieved March 8, 2009 from http//walmartwatch. com/img/ web log/NIMSP_tax_strategies. pdf Salazar, L. C. Cost Cutting Strategies at the Bottom of the Pyramid. Retrieved March 8, 2009 from http//www. lirneasia. net/wp-content/uploads/2007/03/2-lcs-shoestring s-sing-28feb07. pps Sherman, A. J. (2007). Strategies for Cutting Costs and Improving Profitability. Retrieved March 8, 2009 from http//www. sbecouncil. org/uploads/PPT%20Cost%20Cutting%20for%20Growth%20and%20Profitability. ppt