Pricing Approach

• pricing approach refers to the method or strategy a company uses to determine the price of its products or services. It involves considering factors such as production costs, competition, market demand, and customer perception to set a price that directly affects the company's profitability and perception of the product's value
• Step 1: Selecting the Pricing Objective

  Identifying the pricing objective is the primary step toward selecting the right and appropriate price for the product or service (David, 2022).

  1. Competition Based Objective. The level of competition within the industry determines the pricing strategy.

  ⦁ B. Cost Based Objective. The price of a product or service is determined by considering the total cost involved in its production.
• C.  Customer Value Objective. The value determines the price of a product or service or its benefits to customers.

  ⦁ D. Market Share Objective. The pricing strategy is centered around two primary goals: expanding the market share and cultivating strong customer awareness and loyalty.
• E. Sales Orientation Objective. The price is strategically designed to boost sales volume and maximize profits within a specific timeframe.

  ⦁ F. Customer-Driven Objective. The price is established depending on how much the customer is willing to pay.
• Step 2: Determining the Demand

  To determine demand in pricing, marketers can analyze market research data, conduct surveys or interviews with customers, track sales data, monitor competitor pricing strategies, and analyze economic factors such as income levels and consumer preferences. Additionally, implementing price experiments or A/B testing can help determine customers' price sensitivity and willingness to pay
• Step 3: Estimating the Cost.

  To estimate cost in pricing, marketers can follow these steps:

  ⦁ Determine the direct costs involved in producing the product or delivering the service. This includes raw materials, labor, and any other direct expenses.

  ⦁ Calculate the indirect costs, such as rent, utilities, equipment, and administrative expenses.

  ⦁ Consider the desired profit margin and add it to the total costs.

  ⦁ Research the market demand and competition to determine a competitive price range.
• Step 4: Analyzing Competitors Price.

  Analyzing competitors' prices is important for several reasons. It helps businesses make informed pricing decisions and develop effective pricing strategies. Businesses can identify opportunities to differentiate their offerings and attract customers by comparing prices. It also helps them stay competitive by offering fair pricing while maximizing profitability. Analyzing competitors' prices allows businesses to identify trends and patterns, helping them adapt their pricing strategies accordingly
• Step 5: Choosing the Pricing Approach.

  The pricing strategy determines the most effective basis on which a company settles its prices. Companies usually adjust their basic prices for customer differences and changing situations. Some of the most common pricing approaches
• 1. Discount and Allowance Pricing. Most companies adjust their prices to reward customers for specific responses, such as paying bills early, volume purchases, and off-season buying. These price adjustments can take many forms, such as: A. I. cash discount is a price reduction (discount) given in exchange for the buyer paying the invoice (bill) earlier than the standard payment due.
• (a) II. Quantity discount is a price reduction for buyers who buy large volumes
• (A). III. Trade discount is a price reduction granted by manufacturers and wholesalers to retailers   based on order volume or as rewards to other members of the distribution channels for performing different functions such as selling, storing, and record keeping.
• (A). III. Trade discount is a price reduction granted by manufacturers and wholesalers to retailers   based on order volume or as rewards to other members of the distribution channels for performing different functions such as selling, storing, and record keeping.
• (b) Segmented Pricing. Companies often adjust their basic prices for customer-, product-, and location-related differences. In segmented pricing, the company sells a product or service at two

  (2) or more prices, even though the price difference is not based on cost differences.
• (b) II. Customer segment pricing. Different customers pay different prices for the same product or service. Museums, movie theaters, and retail stores may charge lower prices for students, people in the military, and senior citizens.
• (b) iii. Product form pricing. Different product versions are priced differently but not according to cost differences. The differences in costs to the airlines — Business-class and Economy seats

  — are based on the additional comfort and services.
• (b) iv Location based pricing. A company charges different prices for different locations, even though the cost of offering in each location is the same. Some State Universities in America charge higher tuition for out-of-state students, and theaters vary their seat prices because of audience preferences for certain locations.
• (b) v. Time based pricing. A company’s price varies by season, month, day, or hour. Movie theaters charge less during the daytime, and resorts give weekend and seasonal discounts.
•  (c)  Psychological Pricing. In using psychological pricing, sellers consider the psychology of prices, not simply economics. This pricing strategy utilizes the power of psychology to influence customers to take action, purchase, and spend more than they usually would.
• (d) Promotional Pricing. With promotional pricing, companies will reduce the price of their products drastically for a short period to create buying excitement and urgency. Promotional pricing takes several forms
• (D) i. Special-event pricing. It involves price reduction of products according to special events or certain seasons to draw more customers and gain revenue.
• (D) ii. Limited-time offer pricing. It involves promotional deals such as online flash sales, free shipping, and discount codes that create buying urgency and make buyers feel lucky to have gotten in on the deal.
• (D) III. Rebates. This promotional deal offers a cash-back incentive based on the portion of interest or dividends by the buyer. Companies employ this strategy to increase the volume of purchases made by customers.
• (e)  Dynamic and Personalized Pricing. Dynamic pricing is a pricing strategy that applies variable prices instead of fixed prices. Instead of deciding on a set price for a season, retailers can update their prices multiple times per day to capitalize on the ever-changing market.
• Step 6: Selecting the Final Price.

  Choosing the final price in pricing is important because it directly affects a product's or service's profitability. The price needs to be set at an attractive level to customers while also generating enough revenue to cover costs and earn a profit. The right price directly impacts a business's profitability, market position, customer perception, and overall success