A firm's pricing policy represents the overall goals that a company intends to achieve by setting prices for its products. However, setting prices for a company's products is largely an art: a low price causes the buyer to associate it with low quality of the product, while a high price excludes the possibility of many buyers purchasing the product. In these conditions, it is necessary to correctly formulate the company’s pricing policy, keeping in mind the relationships.
In accordance with Methodological recommendations Ministries economic development and trade of the Russian Federation (Order No. 118 dated October 1, 1997), price policy refers to the general goals that the enterprise intends to achieve with the help of prices for its products. Development pricing policy includes several successive stages:
Target selection;
Demand determination;
Cost analysis;
Analysis of competitors' prices;
Choosing a pricing method;
Setting the final price;
Development of a price modification system.
Each step of setting a price is associated with certain restrictions, problems and difficulties that a thoughtful entrepreneur should know about in advance.
Pricing policy goals
The pricing policy of many enterprises is to cover costs and make a certain profit. Some enterprises try to sell goods as expensive as possible. This practice indicates a lack of necessary experience and knowledge in the field of pricing. Therefore, it is important for an enterprise to study various options pricing policies, evaluate their features, conditions, areas, advantages and disadvantages of use.
The main goals of the pricing policy of any enterprise are the following.
Ensuring the continued existence of the company. In the presence of excess capacity, intense competition in the market, changes in demand and consumer preferences, enterprises often reduce prices in order to continue production and liquidate inventories. In this case, profit loses its meaning. As long as the price covers at least the variables and part fixed costs, production can continue. However, the issue of enterprise survival can be seen as a short-term goal.
Maximizing profits, ensuring profitability. Setting this goal means that the company seeks to maximize current profits. It estimates demand and costs for different levels prices and selects the price that will provide maximum cost recovery.
The goal of maintaining the market involves maintaining the enterprise's existing position in the market or favorable conditions for its activities, which requires taking various measures to prevent a decline in sales and intensification of competition.
The short-term achievement of maximizing price turnover, stimulating maximization of turnover, is chosen when the product is produced corporately and it is difficult to determine the structure and level of production costs. Therefore, it is considered sufficient to know only the demand. To achieve this goal, a percentage of commission on sales volume is set for intermediaries. Maximizing turnover in the short term can also maximize profits and market share in the long term.
Ensuring maximum sales growth. Firms pursuing this goal believe that an increase in sales will lead to a reduction in production costs per unit of output and, on this basis, to an increase in profits. Given the market reaction to the price level, such firms set them as low as possible. This approach is called pricing policy attack on the market. If an enterprise reduces the prices of its products to the minimum acceptable level, increases its share of participation in the market, achieving a reduction in production costs per unit of goods as production increases, then on this basis it will be able to continue to reduce prices. However, such a policy can give a positive result only if a number of conditions are present: a) if the market sensitivity to prices is very high (prices have been reduced - demand has increased); b) if it is possible to reduce production and sales costs as a result of increasing production volumes; c) if other market participants do not also begin to reduce prices or cannot withstand competition.
“Skimming the cream” from the market. This comes at the expense of high prices. This occurs when a company sets the highest possible prices for its new products, significantly higher than production prices. This pricing is called “premium”. Certain market segments benefit from the emergence of new products, even at high prices, and benefit from cost savings and better satisfaction of their needs. As soon as sales at a given price decline, the company reduces the price to attract the next group of customers, thereby achieving the maximum possible turnover in each segment of the target market.
Achieving leadership in quality. A firm that succeeds in establishing a reputation as a leader in quality sets a high price for its product to cover the high costs associated with improving quality and the costs of research and development carried out to achieve this.
The listed goals of pricing policy can be implemented in different time, at different prices, there may be different ratios between them, but together they all serve to achieve a common goal - long-term profit maximization.
To carry out all work related to the development and successful implementation of pricing policies, large and medium-sized enterprises create a special structural unit - the pricing department. In enterprises with small and irregular sales volumes, as well as a small number of personnel, this function is performed by the head of the company.
The activities of the price department are constantly built in close contact with other departments of the enterprise and, above all, with the marketing, sales and financial departments. Much attention The work focuses on collecting information on current market conditions, determining the market structure of the company's products, drawing up alternative sales forecasts for products that are possible at different price levels, studying the expected responses of competitors to the company's pricing policy, as well as analyzing a possible increase in sales and revenue without changing prices.
Objectives and mechanism for developing pricing policy
The enterprise independently determines the scheme for developing a pricing policy based on the goals and objectives of the company’s development, organizational structure and management methods, established traditions at the enterprise, the level of production costs and other internal factors, as well as the state and development of the business environment, i.e. external factors.
When developing a pricing policy, the following issues are usually resolved:
in what cases it is necessary to use a pricing policy;
when it is necessary to respond with price to the market policies of competitors;
what pricing policy measures should accompany the introduction of a new product to the market;
for which products from the assortment sold need to change prices;
in which markets it is necessary to carry out an active pricing policy and change the pricing strategy;
how to distribute certain price changes over time;
what pricing measures can improve sales efficiency;
how to take into account the existing internal and external restrictions on business activity in the pricing policy.
The 21st century is an era where the pricing of an enterprise, its strategy and policy are the foundations of the market, the most important lever for the economic management of a company.
It is a polyprocess that consists of a number of interconnected stages.
The main task of marketing and developing a company's pricing policy is an independent scheme created by leading specialists based on the company's goals and objectives, costs, organizational structure, as well as other external and internal factors.
Typically, when creating this scheme, such issues as the price future of the company, the feasibility of developing a pricing policy, price response to marketing, the market policy of a competitor, the choice of goods for which prices should be changed, and many others are taken into account.
But all this information is already familiar to a person even with little knowledge of economic issues. Are there “shadow places” in such a discipline as pricing strategy in marketing?
Let's understand the goals
The development of a marketing pricing strategy for a company, which will include the formation of a pricing policy (PP) of the enterprise, usually takes place in several stages. At the first stage of the strategy, specialists decide what business goals they are pursuing.
As a rule, there are three of them: maximizing profits, ensuring sales, and maintaining the market.
And finally, at the third stage, employees must study the competitor’s products (the rule “forewarned is forearmed” applies here). Economic experts of a particular company can create customer surveys that would reveal the most objective attitude towards the company itself and its competitors.
We also shouldn’t forget about pricing in marketing. It is necessary to monitor whether product prices should be adjusted.
Let's say the product of the above company was made from higher quality raw materials than the product of a competitor. In this case, the higher cost strategy will be justified and will not affect demand.
Main CPU types and world strategies
Russian economists identify the following types of enterprise pricing policy and pricing, unique methods of responding to the work of competitors:
All these basic methods and principles of pricing are characteristic of modern Russian companies. It should be noted that in the West these strategies are gradually becoming obsolete.
One of the most popular strategies is "Skimming Method". It is beneficial for the leading company because it allows you to get maximum profit in a short time.
The company’s goods are literally “thrown in” at a very low price (dumped), and only over time returns to the standard price. The principles of this strategy are reducing costs for research and development work, as well as skillful pricing.
Another interesting pricing policy in the marketing system is “Implementation”. This strategy allows you to throw on the market a large number of goods, and competitors will not have time to react at this time. The company will be able to capture short terms huge market share.
The most poorly studied remains neutral strategy, which comes from the formula P = Z + A + C, where Z is production costs; A - administrative implementation costs; C is the average rate of market or industry profit.
And finally, the pricing policy of the organization also implies moving price strategy, which involves establishing the cost of a product in direct proportion to the balance of supply and demand. This strategy is usually applied to consumer products.
Exchange rate in various market models
An organization's pricing policy is a lever for marketing efficiency and the pricing behavior of an enterprise in the market. In many ways, she is dependent on.
At the moment, there are 4 structural types, which are characterized by unique strategic pricing conditions and industry prices for each specific enterprise:
- free competitive market
- monopolistic
- oligopolistic
- pure monopoly market.
In order for the analysis of an enterprise’s pricing policy to be of the highest quality, it will be necessary to find out what is typical in terms of pricing for all these types of markets.
The cornerstone of any is the strategy of calculating the initial market price. The first step is to set the objectives of pricing activities, then the costs are calculated taking into account all costs.
Economists of the enterprise will have to determine whether there is a balance in the ratio of supply and demand for the goods of the specified company. Next, you should begin researching the products, marketing strategies and prices of competing firms (this can be verified using anonymous public opinion polls).
Pricing policy in the marketing system implies a quick response of prices to any market changes. All that remains is to choose a pricing strategy or method that will allow you to beat competitors in the market and set the final price of the product, which will be equal to the market price, higher or lower than it.
Small conclusion
The principles of pricing, its methods, fundamentals and strategies are the interaction of two components of the main economic balance - supply and demand. Price is one of the main “cogs” of an enterprise’s correct pricing strategy, a method that allows increasing production efficiency.
Prices for products can be free, market prices, which do not depend on the state and are established by the market competition mechanism. But in marketing there are two more types of dependent prices - regulated and fixed. Also, prices can be divided into regional, zone and unified depending on the location of the enterprise. The pricing policy of an enterprise may have different character- wholesale, retail, purchasing.
The organization's pricing policy itself is a complex process in which it is necessary to set the tasks and goals of the central authority, strategic operations, the method of competitive response, as well as assessing production costs, competitors' prices and demand, and analyzing pricing methods.
If someone asks you where prices come from, you can show them this video:
Price in conditions market economy- one of the most important factors determining the profitability of an enterprise. Therefore, the pricing policy must be well thought out and justified. Pricing policy is the general goals that an enterprise intends to achieve with the help of prices for its products, and a system of measures aimed at this. To correctly formulate a pricing policy, a company must clearly understand the goals it will achieve through the sale of a specific product. When choosing a pricing policy, it should also be taken into account that although the global goal of any enterprise is to make a profit, intermediate goals can be put forward such as protecting one’s interests, suppressing competitors, conquering new markets, entering the market with a new product, and quickly recovering costs. , income stabilization. Moreover, achieving these goals is possible in the short, medium and long term.
The main goals of the pricing policy are as follows:
1. Further existence of the enterprise. The enterprise may have excess capacity, there are many manufacturers in the market, there is intense competition, demand and consumer preferences have changed. In such cases, in order to continue production and liquidate inventories, enterprises often reduce prices. In this case, profit loses its meaning. As long as the price covers at least variable and part of the fixed costs, production can continue. However, the issue of enterprise survival can be seen as a short-term goal.
2. Short-term profit maximization. Many enterprises want to set a price for their product that would ensure maximum profit. In achieving this goal, the emphasis is placed on short-term profit expectations and does not take into account long-term prospects, as well as the countervailing policies of competitors and the regulatory activities of the state. This goal is often used by enterprises in unstable conditions of transition economies.
3. Short-term maximization of turnover. A price that stimulates maximization of turnover is chosen when the product is produced corporately and in this case it is difficult to determine the structure and level of production costs. In order to achieve the set goal (maximizing turnover), a percentage of commission on sales volume is set for intermediaries. Maximizing turnover in the short term can also maximize profits and market share in the long term.
4. Maximum increase in sales. Enterprises that pursue this goal believe that increased sales will lead to lower unit costs and, on this basis, to increased profits. Such enterprises set prices as low as possible. This approach is called “market offensive pricing policy.”
5. Skimming the market by setting high prices. This policy occurs when an enterprise sets the highest possible price for its new products, significantly higher than the production price. This is the so-called “premium pricing.” As soon as sales at a given price decline, it is necessary to reduce the price in order to attract the next layer of customers, thereby achieving the maximum possible turnover in each segment of the target market.
6. Leadership in quality. An enterprise that manages to secure its reputation as a leader in quality sets a high price for its product in order to cover the high costs associated with improving quality and the costs of research and development carried out for these purposes. The listed goals of pricing policy can be implemented at different times, at different prices, there may be different ratios between them, but they all together serve a common goal - long-term profit maximization.
Price policy life cycle goods
The best known and most criticized concept is the product life cycle concept. It proceeds from the fact that each product is on the market for a limited time due to obsolescence and is directly related to pricing, since it allows us to study the behavior of prices at various stages of the product’s life cycle, and thereby develop a pricing policy for each phase of the cycle. Each product goes through the following stages: development and entry into the market, growth, maturity, decline and disappearance from the market, that is, it lives its own life cycle, which has a different total duration, the duration of individual stages within the cycle, and the features of the development of the cycle itself.
There is rarely a single price set for each stage of a product's life cycle; at each stage, new consumer segments with different price sensitivities appear in the market, which is taken into account in pricing practices.
Stage of product development and entry into the market
The main characteristics of the development and market entry stage: significant research, development and production costs, the absence of actual competitors, price is an indicator of the quality of the product. Price at this stage, on the one hand, does not play a noticeable role. However, if for consumers price is an indicator of a certain quality, and at this stage of the product's existence they cannot yet compare it with alternative products, then their behavior is relatively insensitive to the price of the innovative product. Therefore, manufacturers must provide broad information about the benefits that consumers will receive from using a new product. In turn, information about the quality of a product is most often disseminated through potential buyers, so future long-term demand for a product depends on the number of initial buyers. According to experts, demand begins to adapt to a new product if the first 2-5% of consumers have adapted to it. On the other hand, the price at this stage should first of all compensate for the initial costs of research and development of new production. Therefore, it is usually high.
"Growth" Stage During the "growth" stage, the product encounters its competitors for the first time, thereby creating greater choice for the consumer. At the same time, consumer awareness increases, which increases his sensitivity to the price of the product. The price at this stage is high, but lower than in the previous phase. The price must exactly correspond to the quality of consumer value that the buyer expects. Entering the mass market depends on the state of the industry, internal capabilities, external environment, goals and directions of future development of the company. In any case, two market elements will always limit the producer's options: competitors and consumers. At the “growth” stage, the following goals of pricing policy can be achieved: - “cream skimming”, or rewards, when the price is set above the price of competitors, emphasizing the exceptional quality of the product; - establishing a “parity” price. This is a situation when there is an overt or secret conspiracy with competitors or when there is a focus on the leader in setting prices. In this case, the focus is on the most typical mass buyer, that is, the company works with the entire market.
Stage of “maturity” of the product A feature of the stage of “maturity” is the appearance on the market of the most price-sensitive group of consumers.
In general, the market situation is as follows:
1) the market is saturated with the product;
2) competition weakens due to the elimination of firms that cannot withstand it (primarily those with high production costs);
3) some firms are moving to create a new product. The price level at the maturity stage is low.
At this stage, its market share is important for the company, since its decrease, even with low costs and the inability to increase the price, leads to an inability to recoup expenses. Often, the “saturation” stage is distinguished as a separate stage of the life cycle. but it can also be considered as the final phase of maturity. During this period, the market is saturated, demand requires new products. To prevent competitors from seizing the initiative, it is necessary to create new products. At this stage, the market expands, firstly, due to previously unreached potential consumers; secondly, due to the geographical expansion of the market. It is at this stage that a certain general “market” price appears, to which producers gravitate to a greater or lesser extent; firms have lower costs for promoting goods due to already existing connections. There is good competition among consumers.
Falling stage At this stage, the product ends its existence in conditions of underload production capacity. The price is either lower than before, or increases if a “lagging” buyer joins in. The impact of this situation on prices depends on the ability of the industry or individual firm to get rid of excess capacity for the production of a given product and switch to a new product. Profits and prices may fall sharply, but they may also stabilize at low levels.
In any case, production will be inefficient for any firm. The following must also be taken into account:
1. If most of the costs are variable costs or funds can be reallocated to more profitable industries (for example, by reducing the number of employees), prices should decrease slightly, which will give impetus to the reduction of production capacity in other firms.
2. If costs are mainly fixed and sunk, average costs depend on the reduction in capacity utilization, price competition may grow as firms try to increase capacity utilization and capture a larger share of a declining market.
3. Basic pricing strategies An enterprise's pricing policy is the basis for developing its pricing strategy.
Pricing strategies are part of the overall development strategy of the enterprise. A pricing strategy is a set of rules and practices that are advisable to adhere to when setting market prices for specific types of products manufactured by an enterprise.
The main types of pricing strategies are;
1. High price strategy
The goal of this strategy is to obtain excess profits by “skimming the cream” from those buyers for whom the new product is of great value, and they are willing to pay more than the normal market price for the purchased product. The high price strategy is used when the company is convinced that there is a circle of buyers who will demand an expensive product. This applies: - firstly, to new goods appearing on the market for the first time, protected by a patent and having no analogues, i.e. to goods that are at the initial stage of the “life cycle”; - secondly, to goods aimed at wealthy buyers who are interested in the quality, uniqueness of the product, i.e., to a market segment where demand does not depend on price dynamics: - thirdly, to new goods for which the company has there is no prospect of long-term mass sales, including due to the lack of necessary capacities. Pricing policy during the period of high prices is maximizing profits until the market for new goods becomes the object of competition. The high price strategy is also used by the company for the purpose of testing its product, its price, and gradually approaching an acceptable price level.
2. Average price strategy (neutral pricing) Applicable in all phases of the life cycle, except decline, and is most typical for most enterprises that consider making a profit as a long-term policy. Many enterprises consider this strategy to be the most fair, since it eliminates “price wars”, does not lead to the emergence of new competitors, does not allow firms to profit at the expense of customers, and makes it possible to receive a fair return on invested capital. Foreign large and super-large corporations in most cases are content with a profit of 8-10% of share capital.
3. Low price strategy (price breakthrough strategy) The strategy can be applied at any phase of the life cycle. Particularly effective when price elasticity of demand is high.
Applicable in the following cases:
a) in order to penetrate the market, increase the market share of their product (policy of exclusion, policy of exclusion);
b) for the purpose of recharging production capacity;
c) to avoid bankruptcy. The low-price strategy aims to achieve long-term, rather than quick, profits.
4. Target price strategy With this strategy, prices, sales volumes, and the amount of profit should remain constant, no matter how much they change, that is, profit is the target value. Mainly used by large corporations.
5. Preferential pricing strategy Its goal is to increase sales. It is applied at the end of the product life cycle and manifests itself in the application of various discounts.
6. “Bound” pricing strategy When using this strategy, when setting prices, they are guided by the so-called consumption price, equal to the sum of the price of the product and the costs of its operation.
7. Strategy of “following the leader” The essence of this strategy does not imply setting prices for new products in strict accordance with the price level of the leading company on the market. We are only talking about taking into account the pricing policy of the leader in the industry or market. The price of a new product may deviate from the price of the leading company, but within specified limits, which are determined by quality and technical superiority.
The following strategies are less commonly used:
a) constant prices. The enterprise strives to establish and maintain constant prices over a long period, and since production costs increase or may increase, instead of revising prices, enterprises reduce the size of the packaging and change the composition of the product. For example, you can reduce the weight of a loaf of bread that costs 10 rubles, while leaving the price unchanged. The consumer prefers such changes to price increases;
b) unrounded prices, or psychological prices. These are, as a rule, reduced prices versus some round sum. For example, not 10 thousand rubles, but 9995; 9998. Consumers get the impression that the company carefully analyzes its prices and sets them at a minimum level. They like to receive change;
c) price lines. This strategy reflects a price range, where each price indicates a certain level of quality for the same product. In this case, two decisions are made: the range of supply prices is determined - the upper and lower limits - and specific prices are set within this range. The range can be defined as low, medium and high.
Even less commonly used are pricing strategies such as:
Sales assistance;
Differentiated prices;
Restrictive (discriminatory) prices;
Falling leader;
Bulk purchase prices;
Unstable, changing prices.
As a result of studying this chapter, the student should:
know
- distinctive features pricing policy of trading enterprises;
- main types of pricing strategies;
- principles of their formation and main stages of development;
be able to
- navigate the pricing policy of a trading enterprise;
- types of pricing strategies and principles of their formation;
own
Information on the significance and impact of price policy on the economic situation of a trading enterprise.
Concept of price policy
Price policy- This general principles which the company intends to adhere to in setting prices for its goods or services.
The subject of the pricing policy of a trading enterprise is not the price of the product as a whole, but only one of its elements - trade markup, which characterizes the price of trade services offered to the buyer when it is sold to trading enterprises. Only this element of the price, taking into account the conditions of the consumer market, the conditions of its economic activity, the manufacturer’s price level and other factors, the trading enterprise forms independently. Despite high degree connection with the manufacturer's price, level trade markup is not always determined by the price level of the product. Thus, at a low price level for a product offered by its manufacturer, a high level of trade markup can be formed, and vice versa - when high level Manufacturer prices and trading enterprises are often limited to a low level of trade markup. This specificity trading activities determines the features of the formation of the pricing policy of a trading enterprise.
Under formation of the pricing policy of a trading enterprise understands the rationale for a system of differentiated levels of trade markups on goods sold and the development of measures to ensure their prompt adjustment depending on changes in the situation in the consumer market and business conditions.
Pricing policy should be focused on certain long-term and short-term goals, achieved using various tools and organizational solutions (Fig. 5.1).
Rice. 5.1.
The goals of pricing policy may be different. In the long term, they are one way or another expressed in maximizing profits and strengthening the market position of the enterprise. In the short term, i.e. as a specific goal that can be achieved in a given period using price, it can be any current problem related to meeting customer needs, attracting new customers, expanding sales markets or the financial position of the enterprise.
Traditionally, the following are the goals achieved by an enterprise through the use of pricing policies:
- maximizing profitability of sales, i.e. the ratio of profit (as a percentage) to total sales revenue;
- maximizing net profitability equity enterprises (i.e. the ratio of profit to total assets on the balance sheet minus all liabilities);
- maximizing the profitability of all assets of the enterprise (i.e. the ratio of profit to total accounting assets formed at the expense of both own and borrowed funds);
- stabilization of prices, profitability and market position, i.e. the enterprise's share in total sales in a given product market (this goal can acquire special meaning for enterprises operating in the market where any price fluctuations give rise to significant changes in sales volumes);
- achieving the highest rates of sales growth.
However, this list is not exhaustive. Each company independently determines the most important directions, defining for itself long-term and short-term goals and objectives in relation to certain aspects of the company’s activities and the company’s existence in the market as a whole and its further development. Thus, to the number main goals The following can also be included:
- continued existence of the enterprise can be considered as both a long-term and short-term goal. On the one hand, every enterprise is interested in long-term efficient work in the market, and pricing policy can help adapt to constantly changing market conditions, on the other hand, by changing prices, enterprises solve short-term problems, such as liquidation of inventories, availability of excess production capacity, change consumer preferences and others;
- short-term profit maximization – is actively used in the unstable conditions of a transition economy. Its implementation places emphasis on short-term profit expectations based on the forecast value of demand indicators and production costs, and does not take into account such important points as long-term prospects, the opposing policies of competitors, regulating the activities of the state;
- short-term turnover maximization – can ensure maximum profit and market share in the long term. In the short term, intermediaries are set a percentage of commission on sales volume based on demand data, since often
it is difficult to determine the structure and level of production costs;
- maximum sales increase – "market offensive pricing policy." It is used on the assumption that increased sales will lead to lower unit costs and, consequently, increased profits. However, it is necessary to take into account that this policy can give the necessary result only if a number of conditions are met:
- high market sensitivity to prices;
- the possibility of reducing production and sales costs as a result of expanding production volumes;
- competitors will not use a similar pricing policy;
- "skimming" " Withmarket by setting high prices - "premium pricing". It is most effective for new products, when, even at higher prices, certain market segments achieve cost savings by better satisfying their needs. But it is necessary to monitor the achievement of the maximum possible turnover in each target segment and, if sales at a given price decrease, also reduce the price;
- leadership in quality – such a reputation makes it possible to set high prices for goods, thereby covering the high costs associated with improving quality and R&D.
The goals of the pricing policy determine the choice of its strategy and operational-tactical tools. The starting point for developing a pricing strategy should always be the so-called triangle “company – client – competitor”.
Operational-tactical tools pricing is a large group of pricing policy tools that allows you to solve short-term strategic tasks, as well as quickly respond to unexpected changes various factors pricing or aggressive pricing policies of competitors.
Experts point out that significant reasons for using these tools include: three basic cases.
- 1. The company enters the market and makes the first decision about price and its role in the marketing mix (price as an element of the enterprise’s marketing mix).
- 2. The need for changes and active actions to improve price efficiency in the system of elements of the marketing mix.
- 3. Rapid adaptation of pricing policy instruments to changes in internal and external pricing factors (increased costs, introduction of product and marketing innovations by competitors, changes in price perception among consumers, etc.).
Main operational-tactical instruments of pricing policy V modern conditions are called the following:
- short-term changes in prices (or their elements);
- price differentiation (for different consumers);
- price variations (by time periods);
- policy of price lines (borders, groups, price levels);
- price organization and control (collection of price information, negotiations, price recommendations, guarantees, etc.).
The pricing policy should correlate with the general policy and be formed on the basis of the company's strategic goals. With that said scheme for forming the company's pricing policy can be represented as follows. At the beginning, information is collected and a preliminary analysis of external and internal factors is carried out, which represent the initial information for analyzing the current situation and future market prospects. Next, a strategic analysis of the collected information is carried out, on the basis of which the company’s pricing policy is formed (Fig. 5.2).
The pricing policy management process takes into account consistent stages construction pricing policy at the enterprise: setting objectives and developing pricing goals, searching for solutions and alternatives, coordinating and summarizing pricing information, making pricing decisions, their implementation and control. Thus, it employs specialists from various departments and levels of the company. Financial managers calculate the value of costs and determine the price level for goods that allows them to cover costs and bring the planned profit. Marketing and sales specialists conduct consumer research and determine how low prices can be to meet sales targets. Thus, pricing policy management process based on analysis of market information and financial indicators company and consists in finding alternative options for achieving the goals and implementation of the company’s objectives and their financial justification. An effective pricing policy requires an optimal combination of internal financial constraints and external market conditions. The effectiveness of a company's pricing strategy should be assessed depending on whether the goals set for the company when choosing a pricing strategy have been achieved.
Rice. 5.2.
Not all trading enterprises can independently and independently set prices for goods, implementing their pricing policy in the consumer market. The basic pricing policy for a product in the consumer market is formed by its manufacturer, positioning its product in a certain way and choosing one or another marketing strategy. In this regard, when forming their pricing policy, trading enterprises are forced to largely focus on the pricing policy of the manufacturer.
Unlike production, trading enterprises in the vast majority of cases form their pricing policy not for individual goods, but for certain groups of goods. Thus, at trading enterprises the pricing policy is not mono-product, but political character.
The pricing policy of trading enterprises is influenced by level of trading services. This is due to the fact that the price level at which goods are sold at trading enterprises is inseparable from the specific level of service offered to customers at these enterprises.
The price system at trading enterprises is, as a rule, more strictly standardized than at manufacturing enterprises. This is determined by the fact that the trading enterprise is guided by the average indicator of profitability of operations for all goods of all product groups. Thus, any change in the price of a particular product above the standard may lead to a change in the results of the enterprise.
In retail trade, the concept of “base price” is not even used, which is subject to negotiation during the sales process. And even used by individual enterprises retail the system of price discounts is standard in relation to individual price situations or categories of buyers. This complicates the flexibility of implementing pricing policies at trading enterprises.
Trade enterprises do not usually apply a number of pricing strategies of manufacturers associated with a long-term unfavorable situation in the market for a particular consumer product. As a rule, trading conditions allow a trading enterprise to quickly leave such commodity market, i.e. stop purchasing and selling this product, while the manufacturer must actively fight for the return of funds invested in its production.
If a company asks itself the question: “What price should we set to cover costs and get good profit", then this means that it does not have its own pricing policy and, accordingly, there can be no talk of any strategy for its implementation. We can talk about pricing policy if the question is posed in a completely different way: " What costs do we need to have in order to earn a profit at the market prices that we can achieve??".
In the same way, it is inadmissible to say that a company has some kind of pricing policy or strategy if it asks itself a seemingly completely “market” question: “What price will the buyer be willing to pay for this product?” Formation of a pricing policy should begin with the question: “What value does this product provide to our customers and how can the company convince them that the price corresponds to this value?”
Finally, a pricing professional would not ask the question, “What prices will allow us to achieve our desired sales volumes or market share?” He will look at the problem differently: " What sales volume or market share would be most profitable for us??".
The greatest contradiction arises here between financial managers and marketing services of firms. However, conflicts between financiers and marketers over pricing policy usually arise in those firms where management has not made a clear choice between two alternative approaches to pricing: cost and value.
The essence of pricing policy is to provide the offered goods and services with the most optimal economic characteristics, which are able to adapt to the continuously changing market situation. Pricing policy is the most important part of the marketing program and provides the company with the following advantages:
- Does not require additional.
- Allows you to support other marketing methods for promoting products.
- Stimulates sales by changing prices.
Stages of developing a pricing policy
Pricing policy is a price formation process that ensures the achievement of the following goals: profit maximization; consolidating market positions and penetrating new segments; creating a company's business reputation.There are several stages for developing a pricing policy:
- At the first stage, you should decide on the purpose of the pricing policy. This goal may contain a broad area of business development or small prospects for the enterprise to enter the new level sales
- The second stage is characterized by internal marketing research. As part of this analysis, an assessment is made of the production capacity of the equipment, labor costs, the cost of raw materials and supplies, the costs of transporting goods and the search for new distribution channels, the costs of marketing activities that stimulate sales, etc.
- At the third stage, marketing research pricing strategies of competitors, namely, price levels for analogue products, price variations depending on changes market factors and consumer preferences, flexibility of pricing policies and features of the choice of pricing strategies.
- The fourth stage is determined by the method by which the retail price of own goods will be determined. The main criterion when choosing a pricing approach is to obtain the maximum possible profit.
- At the fifth stage, programs are developed to adapt prices to constantly changing market conditions. At this stage, factors influencing consumer demand are analyzed, as a result of which the price needs to be adjusted. These factors include:
- rising production costs and wages;
- the need to increase production capacity and attract additional labor;
- general state of the economy, trends towards a crisis;
- product quality level;
- totality functional characteristics goods;
- availability of analogues on the market;
- the prestige of the brand under which the product is promoted;
- income level of potential consumers;
- product life cycle stage;
- dynamics of demand development;
- type of market.
- These factors can be combined with each other and supplemented by other conditions. The main difficulty of this stage is that most of these factors cannot be measured quantitatively.
- The sixth stage is the final one, as it completes the price formation process with the final monetary expression of the value of the product.
Before using a particular pricing policy, you cannot ignore the general retail level prices in its daily dynamics. This information can be obtained from statistical directories, catalogs of other enterprises and other sources. Pricing strategies are practical application pricing policy and represent a decision regarding the launch of the most best price, focused on achieving the highest level of demand in conjunction with maximum profit. Pricing strategies are developed within the forecast period of time and have several modifications. Existing pricing strategies can be characterized by the following tasks:
- penetration into a certain market segment;
- consolidation of existing positions;
- maintaining demand;
- extending the product life cycle;
- obtaining the maximum possible profit;
- Creation competitive advantages;
- development of intended market niches;
- formation of consumer demand;
- return on production costs;
- sales promotion, etc.
Types of Pricing Strategies
To solve these problems, the following pricing strategies are used: - “Skimming” strategy.
This strategy is applicable mainly to a new product that has no analogues on the market. This product creates a unique need, which can only be satisfied by its unique properties and features. The retail price for such goods is set significantly higher than the cost price with the expectation of receiving maximum profit at the first stage of the product life cycle. Later, the price gradually decreases, allowing each category of buyers to purchase a new product, paying for it as much as their financial capabilities allow. The successful implementation of the proposed strategy depends on the level of demand and consumer awareness of the benefits that he will receive after purchasing the product. - Market penetration strategy.
This strategy is mainly used by firms that have recently entered the market. The essence of the strategy is to set the lowest possible prices for goods of own production. This approach often leads to some losses and leaves the company without profit. The main goal of this strategy is to attract the attention of consumers to the products of this organization and acquire loyal customers. - Differentiated pricing strategy.
This strategy involves the development of heterogeneous prices for different localities and places of sale of goods. This approach may be due to different amounts of costs that the company incurs when delivering goods to one point or another. Prices developed within the framework of this strategy are proposed to be used in combination with incentive discounts and promotions. - Preferential pricing strategy.
This strategy offers the same product to different categories of consumers at heterogeneous prices. With this approach, one should take into account the level of income and the degree of importance of a group of representatives of a particular target audience for the enterprise. - Psychological strategy.
This strategy implies that the price of the product is not rounded to a whole value, but leaves a few kopecks after the decimal point. This approach allows the consumer to expect change, and also to think that this price was the result of careful calculations. - Wholesale pricing strategy.
This strategy involves reducing prices to encourage one-time purchases of large quantities of goods. - Elastic price strategy.
This strategy takes into account only the purchasing financial capabilities and characteristics of consumer preferences, on the basis of which the price is formed. - Prestige pricing strategy.
This strategy involves setting high prices for goods that have a special level of quality.
Example of pricing strategy formation
As a practical example, let us consider the process of forming a pricing policy at company “A”. Company “A” is an intermediary between the developer of software products on the 1C platform and their end user. Since prices are software are determined by the manufacturer, pricing policy is being developed in terms of determining the cost of contracts for technical support of software products. The process of creating a pricing policy at company “A” can be represented in the following stages:
- Determining the goals of the pricing policy.
Taking into account the fact that the demand for service maintenance of software products is growing, and the labor and time resources at company “A” are not enough to satisfy the entire volume of consumer needs, the goal of the pricing policy will be formulated as follows: finding the optimal price for a comprehensive service agreement , ensuring the planned rate of profit and restraining rush demand. - Marketing research of internal production capabilities.
The results of the analysis are presented in Table 1.Table 1
Analysis of the production capacity of company "A"
The monetary data given in Table 1 together constitute the minimum amount that Firm A must receive each month to cover the costs of running the company.№
p/pIndicator name Unit Quantitative expression 1. Labor costs rub. 100000 2. Number of technical support specialists people 5 3. Average time spent per client (including round trip travel) hour. 2 4. Utilities and communication services rub. 5000 5. Settlements with suppliers rub. 20000 6. Business expenses rub. 10000 7. other expenses rub. 15000 - Marketing research of competitors' pricing strategies.
The results of the analysis are shown in Table 2table 2
Analysis of competitors' pricing strategies The data provided reflects the prices for technical support contracts that competitors enter into with their consumers. - Deciding on the pricing method for your own service contracts and calculating the final price.
Taking into account the above factors, the price for work under a service contract will be formed on the principle of focusing on greater profits.
Company A has 80 regular customers. The average price for a service contract is 3,000 rubles. This approach to pricing brings company “A” monthly about 240,000 rubles in revenue. This amount covers costs and leaves a share of profits for business development. But experts technical support do not have time to satisfy the needs of all customers on time, which is why conflicts periodically arise between company “A” and its consumers.
To solve this problem, it was decided to increase the price of service contracts by 40% without changing the range of services provided to clients. Now the average price for a service contract is 4,200 rubles. As a result of this action, 15 clients refused to cooperate with company “A”. Now the average monthly revenue is 273,000 rubles, which exceeds the previous figure by 33,000 rubles. Thus, company “A” received most of the profit by reducing the time spent on servicing clients who are not ready to pay the established cost of service contracts.