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Discussion: Price
It is obvious that the primary goal of every company is to generate higher profits and all
the marketing activities would be focused on the achievement of this goal. The financial results
of the firm determine the success of the company, and the right pricing strategy is crucial for any
business. Pricing has always been an integral component of marketing, and of the traditional
marketing elements, only pricing creates revenue; a sound pricing strategy is required to
facilitate customer value creation, structure price decisions, and earn profits (Kienzler &
Kowalkowski, 2017).
Price is complex marketing mix part that ensures organizational system with certain level
of revenues, but at the same time price level influences customers' decisions on purchasing a
service or a product, organizational system competitiveness, and its market position. Therefore,
it is important to estimate price realistically, and to choose appropriate method of its calculation
(Bijakšić et al., 2017). While developing the pricing strategy for a product, it is highly important
to keep in mind various factors, such as competitors’ prices, discounts and terms of sales, as well
as the perceived value of the product by the potential customers. Both overpricing and
underpricing a product or service can potentially cause the loss of customers.
According to the studies, a discounted price, rather than a merely low price, can make a
consumer more willing to purchase. First, a high initial price can indicate the seller has chosen to
supply a high-quality product. Second, when a seller with limited stock runs a clearance sale,
later consumers infer that unsold stock has higher expected quality when its initial price was
higher (Armstrong & Chen, 2020). A discount on a particular product can be seen both as a great
deal that draws more customers, and can potentially give an impression of the product being less
exclusive and thus not so valuable. Psychological influence of price on a customer is especially
interesting, as price is often a measure of product or service value. In certain situations, a
company can increase price to emphasize product quality but also the social status of customers
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that use listed product or service. Customers can also emotionally react on certain price level,
and company can use such reaction to define its price policy (Bijakšić et al., 2017).
Studies indicate that one of the most difficult tasks in pricing is developing a pricing
strategy for a new product, as inappropriate pricing can put at stake all the efforts made in the
development of the product (Feurer et al., 2019). Even for an already existing product, a poorly
developed marketing strategy can influence the customer behavior, weaken the position of the
company in the market and even prevent the future development of the business (Bijakšić et al.,
2017).
How pricing teams develop effective pricing strategies for new products: PRICING
TEAMS AND NEW PRODUCT PRICING STRATEGIES.
This article focuses on the issue of developing an effective pricing strategy for new
products. According to the authors, it is an increasingly important task, as it often determines the
success or failure of the whole marketing campaign. Feurer et al. believe that rationality and
intuition are two key pricing team information-processing modes that drive the effectiveness of a
new product’s pricing strategy. The characteristics of a pricing team were examined in order to
find out how they affect the team’s ability to apply rationality and intuition while developing a
pricing strategy for a new product. Based on the results of the study, the authors suggest that the
managers should encourage their employees to use rational decision-making in the development
of pricing strategies for new products, but also allow intuition to complement the rational
decision-making. Finally, Feurer et al. claim that it is crucial for the company to find the right
pricing team that will use both rational and intuitive judgement, as it is critical for the successful
sales of new products.
Expert pricing system as part of marketing mix
According to the authors, developing a pricing strategy for a product is a complex
marketing task that has a great impact on the organizational performance and economic results of
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the whole company. Even a small mistake in the pricing strategy can be ruining for the company,
as it can directly influence the customer behavior, weaken the firm’s market position and
endanger the company growth and development in the future. Bijakšić et al. discuss that a
thorough analysis of all the important pricing determinants can be conducted effectively by the
expert systems – computer programs that use a large knowledge base for analysis. The authors
suggest that the factors that should be used in the development of the pricing strategy for a
product should include elasticity of demand in relation to price change, market structure on the
side of product or service supply, intensity of business activity, and set business goals.
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References
Armstrong, M., & Chen, Y. (2020;2019;). discount pricing.Economic Inquiry,58(4), 1614-
1627.@https://doi.org/10.1111/ecin.12774
Bijakšić, S., Markić, B., & Bevanda, A. (2017). expert pricing system as part of marketing
mix.Informatologia,50(3/4), 141-150.
Feurer, S., Schuhmacher, M. C., & Kuester, S. (2019). How pricing teams develop effective
pricing strategies for new products: PRICING TEAMS AND NEW PRODUCT PRICING
STRATEGIES.The Journal of Product Innovation Management,36(1), 66-
86.@https://doi.org/10.1111/jpim.12444
Kienzler, & Kowalkowski, C. (2017). Pricing strategy: A review of 22 years of marketing
research.@Journal of Business Research,@78, 101–110.
https://doi.org/10.1016/j.jbusres.2017.05.005
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