Author Question: Strategies relating to price become more mixed during a product's maturity stage. Indicate whether ... (Read 109 times)

Diane · **on:** Jun 29, 2018

Strategies relating to price become more mixed during a product's maturity stage.

Indicate whether the statement is true or false

Question 2

Identify and describe the major factors that affect pricing decisions.

wuly · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

True

Answer to Question 2

Establishing prices involves selecting a basis for pricing: cost, demand, and/or competition. The appropriate pricing basis is affected by the type of product, the market structure of the industry, the brand's market share position relative to competing brands, and customer characteristics. An organization generally considers at least two, or perhaps all three, dimensions. Firms must weigh many different factors when setting prices, including costs, competition, customer buying behavior and price sensitivity, manufacturing capacity, and product life cycles.
Marketers should set prices that are consistent with the organization's goals and mission. For example, a retailer trying to position itself as being value oriented may wish to set prices that are quite reasonable relative to product quality. The types of pricing objectives a marketer uses obviously have considerable bearing on the determination of prices. For instance, an organization that uses pricing to increase its market share would likely set the brand's price below those of competing brands of similar quality to attract competitors' customers. Clearly, costs must be an issue when establishing price. A firm may temporarily sell products below cost to match competition, generate cash flow, or even increase market share, but in the long run, it cannot survive by selling its products below cost. All marketing-mix variables are highly interrelated. Pricing decisions can influence evaluations and activities associated with product, distribution, and promotion variables. When making price decisions, a producer must consider what members of the distribution channel expect. A channel member certainly expects to receive a profit for the functions it performs. When making pricing decisions, marketers should address a vital question: How will our customers interpret our prices and respond to them? Interpretation in this context refers to what the price means or what it communicates to customers. Does the price mean high quality or low quality or great deal, fair price, or rip-off? A marketer needs to know competitors' prices so it can adjust its own prices accordingly. This does not mean a company will necessarily match competitors' prices; it may set its price above or below theirs. However, for some organizations, matching competitors' prices is an important strategy for survival. Legal and regulatory issues influence pricing decisions. To curb inflation, the federal government can invoke price controls, freeze prices at certain levels, or determine the rates at which firms may increase prices.