Mango

SETTING PRICING POLICY
The firm has to consider many factors in setting its pricing policy. We will describe a six-step procedure for price setting:
* Selecting the pricing objective
* Determining demand
* Estimating costs
* Analysing competitors ‘ costs, prices and offers
* Selecting a pricing method
* Selecting the final price.
* Adapting the priceSELECTING THE PRICING OBJECTIVE
| PRICE |
PRODUCT QUALITY | | HIGH | MEDIUM | LOW |
| HIGH | 1 Premium strategy | 2 High-value strategy | 3 Super-value strategy |
| MEDIUM | 4 Overcharging strategy | 5 Medium –value strategy | 6 Good –value strategy |
| LOW | 7 Rip-off strategy | 8 False economy strategy | 9 Economy strategy |

Broadly, we can say that people are sensitive tothe value for price- quality. They will sensibly buy from them and save money (unless firm 1's product has acquired snob appeal).
Positioning strategies 4, 7 and 8 amount to overpricing the product in relation to its quality. The customers will feel taken and will probably complain on spread bad word of mouth about the company. Professional marketers should avoid these strategies.
The companyfirst has to decide what it wants to accomplish with its particular product offer. A company can pursue any of six major objectives through its pricing: survival, maximum current profit, maximum current revenue, maximum sales growth, and maximum market skimming or product-quality leadership.
SURVIVAL: companies pursue survival as their major objective if they are plagued with overcapacity, intensecompetition, or changing consumer wants. Survival is only a short- run objective. In the long run, the firm must learn how to add value or face on extinction.
MAXIMUM CURRENT PROFIT: Many companies try to set the price that will maximize current profits. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, orrate of return on investment.
MAXIMUM CURRENT REVENUE: Some companies set a price that maximizes sales revenue. Revenue maximization requires estimating only the demand function. Many managers believe that revenue maximization will lead to long- run profit maximization and market share growth.
MAXIMUM SALES GROWTH: Some companies want to maximize unit sales. They believe that a higher salesvolume will lead to lower unit costs and higher long-run profit. They set the lowest price, assuming the market is price sensitive. This practice is called market-penetration pricing. The following conditions favour setting a low price: the market is highly price sensitive, and a low price stimulates market growth, production and distribution costs fall with accumulated production experience andthird, a low price discourages actual and potential competition.
MAXIMUM MARKET SKIMMING: Many companies favor setting high prices to "skim" the market. Market skimming makes sense under the following conditions: 1) a sufficient number of buyers have a high current demand 2) the unit costs of producing a same volume are not so high that they cancel the advantage of charging what the traffic willbear 3) the high initial price does not attract more competitors to the market 4) the high price communicates the image of a superior product.
PRODUCT– QUALITY LEADERSHIP: A company might aim to be the product-quality leader in the market.
DETERMINING DEMAND
Each price that the company might charge will lead to a different level of demand and will therefore have a different impact on itsmarketing objectives. The relation between alternative prices that might be charged in the current time period and the resulting current demand is captured in a demand curve.
Demand curve sums the reactions of individuals who have different price sensitivities. Authors have classified nine factors:

* unique-value effect: buyers are less price sensitive when the product is unique.
*...