Price is one of the major elements of marketing mix. It is a fundamental strategic issue, which is also link to product positioning. Moreover, pricing affects other elements of marketing, such as channel decision, promotion and product features. At the same time, there is no clear cut formula to that is used to determine pricing; some general steps might be followed to arrive at pricing a new product.
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Pricing must factor in the legal and competitive environment that a company operates upon. From a competitive ground, the firm must take into consideration the implications of pricing on competitors.
For instance, setting a product at a very low price may generate a price war, which isn’t going to be of benefit to either side. On the other hand, from a legal ground a firm is not exempted to price their product at any desired level. For instance, there is a possibility of price control which prohibits product from being over charged
It is imperative to identify pricing objective in order to decide on the optimal pricing. Current profit maximization is a common objective; it aims at minimizing current profit and brings about revenue and costs.
Maximizing current revenue is another objective that seeks to maximize the present revenue without regarding profit margin. Consequently, maximizing quantity should be considered as well since it minimizes the quantity of customers served and the quantity of units sold, so as to minimize long-term costs as experience curve would have it predicted.
There are various ways or strategies to price a product. Some of the policies include; premium pricing, economic pricing, promotional, geographical and value pricing. However it is entirely depend with the satiation on the ground when it comes to implementation.
Johnson and Johnson is an already established company or brand for that matter. Hence, some of the strategies may not be fit for them. Value pricing could be the most appropriate strategy. The approach is applicable when external factors like increased competition or recession compels companies to offer value on products, in order, retain customers.
It simply means getting value for your money, for instance, the amount spent makes it a worthwhile experience. In some ways, it is same as economic pricing. However one must never mistake value added, in regards to product and services. Price reduction does not normally increase value.
Promotional pricing is another strategy that could be used especially as a marketing tool. It is a very common approach. There are quite a number of instances of promotional pricing, for example, free offers, discounts and vouchers. A promotional pricing item tends to create controversy. A number of countries all over the world have stipulated laws that administers the period which a product can be put up for sale.
Geographical pricing is a must to be considered form of pricing, bearing in mind that Johnson and Johnson is an international brand. It observes pricing variations in different spheres of the world, for instance, rarity value, in other words, where the cost of shipping increases price.
In some places more tax is demanded on a particular type of product, hence, it makes them either more, or a little less expensive. Laws that limit the number of products to be imported again increase the revenue. Jonson and Johnson implementing both or either of these strategies can greatly increase market in the Baby care line.
Kotler, P. & Armstrong, G. (2010) Principles of Marketing, Upper Saddle River, NJ: Prentice Hall.
Thomas, N. & Reed, H. (2002) The Strategy and Tactics of Pricing, Upper Saddle, NJ: Prentice Hall.