i need a rely for this discussion The role of pricing is comprised of three pric

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i need a rely for this discussion

The role of pricing is comprised of three price strategies: cost, customers, and competitors which a company gives determination of making a suitable profit.

First, cost can compose prices for consumers. Today, see fast food restaurants like Burger King and Wendy’s are setting the level of pricing for meals on the menu. Burger King has an offer for two Whoppers, two small fries, and two drinks for $10. Not bad for two people to eat. Next, Wendy’s has an offer for $4: small bacon cheeseburger, small order of chick nuggets, small fry, and a small drink. In fact, fast food restaurants are looking at the economy to find a way to lure customers to purchase food at a lower price. I love this pricing because it helps me and others to conserve money during difficult times. In addition, McDonald’s are having family orders for a low price of $20: 40 chicken McNuggets, four large fries, and four large drinks. This prime example of total fixed cost, which cost does not change regardless of the output (Hiam & Schewe 1992, pg. 293). In other words, it is a win-win situation for the fast food restaurants and the customers.

Second, customers can determine price for their selection of need. For example, a consumer is looking for a compact car. He or she wants a Kia Rio which saves a lot of money on fuel and very economical. The price is less than $9,000. The person finds out it is affordable and a great price. As a result, the consumer made the purchase and was happy about it. The price of a car can determine the actions of a buyer.

Third, competitors can start a clash of low and high prices with companies. These battles can be very disturbing, but beautiful at the end. Target and Wal-Mart, for example, are two retail store chains continue to have low prices on their products. One thing, I love about Wal-Mart is the health section, which carries a full line of vitamins and supplements. As a bodybuilder, I was looking for a weight gain powder supplement that was reasonable in price. I found the price very low for $24.99 for four pounds. A few minutes later, I purchased the product and gain a lot of positive results. In fact, Wal-Mart uses “company strategy, structure, and rivalry” to generalize the other competition (Hiam& Schewe 1992, pg. 96).

In conclusion, the role of pricing is comprised of cost, customers, and competitors. Also, it can determine how the companies can go for in the selected markets for the consumer.

Explanation / Answer

Companies spend considerable time in selecting the correct price for its products and services so as to generate reasonable demand and fulfill its objectives. The first pricing strategy is known as the cost based pricing strategy. The main consideration for setting the price of a product or a service is the costs incurred by the seller. The per unit costs that is incurred by a company is the floor for the price. In other words, companies do not set a price that is lower than the cost. Costs include production costs, selling, general and administrative expenses. The per unit cost of the product is calculated and a profit margin is added to the cost to determine the selling price.

The next pricing strategy is the customer value based pricing. Consumers buy a product or a service in order to fulfill their wants. They select a particular product from the several options available in the market as they perceive that the selected product offers some value to them. This is known as value perception by consumers. A manufacturer must understand the value of his products and services to the consumers. For example, an airline company offers economy class flying, business class flying and first class flying. First class flying will provide additional facilities like fully reclining seats, shower cubicles, gourmet meals etc. Customers perceive more value in first class flying and hence are willing to pay a premium. This will enable the airline company to charge a premium and hence earn a higher profit margin from the sale of first class tickets.

The last strategy is the competition based pricing. Prices are set on the basis of prices being offered by the competing companies. This type of strategy is used in a highly competitive market or for market where commoditized goods are sold. For instance, the economy seats of an airline company are usually priced keeping in mind the prices of competing airlines.

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