In this paper, I intend to discuss those factors, which influence the pricing strategies of the companies. In particular, I would like to analyze the internal environment and the objectives of the management. The main focus of this essay will be on such industries as information technology. The basis for this work will be the research article Pricing objectives and pricing methods in the services sector, written by George Avlotinis and Kostis Indounas. In their study, the authors explore the methods used by the leading Greek companies for setting the price on their commodities. Furthermore, it is necessary to draw a specific example, showing the impact of internal factors on the price of electronic products; in this case, I will refer to the policies of Microsoft Corporation.
However, at first, we may need to make a general overview of those determinants, which shape managerial decisions. On the whole, they can be of two types: external and internal. As regards external influence, we can single out such aspects as the situation in the market, customers perceptions of cost and value, demand for a particular product or service, absence or presence of competitors and so forth. In turn, the internal environment may include the following parameters: effectiveness of the company, marketing objectives, operation costs, and the product, its novelty, applicability, popularity etc ( Daly, 2001, p 13). Naturally, the management has to take into account all of the above-mentioned factors. Subsequently, there are various approaches to pricing as an element of marketing mix. We may point out target, market, perceived value, demand-based pricing (Avlonitis & Indounas, 2005, p 47).
At this stage, we should refer to the activities of such international giants as Microsoft; we should pay extra attention to the promotion of the software operation system Windows 3.0. One has to consider the fact that at that moment the company was not the main developer of operation systems in the world. Overall, it is quite possible for us to argue that this solution broke even and achieved success due to the prudent pricing policy, pursued by Microsoft (Cusumano & Selby, 1995, p 143). One should presume that it was an enormous breakthrough or that it was too innovative; similar software had been worked out by Macintosh. Naturally, it was modified and improved however; its major advantage was the affordable price, especially in comparison with analogous solutions of Microsofts competitors. This decision was shaped by such determinants as the cost of production, the quality of the product, and finally, the major objective of Microsoft management (to strengthen the positions in this particular industry or even to win the palm of supremacy). It will not be an exaggeration to state that this effort quite reached its aim. This case can be regarded as an example of cost-and-competitor-based pricing method. Additionally, we should not overlook the fact that Microsoft conducted careful research of the customers quality and cost expectations, thus, immediately after the release Windows 3.0 and its later series were met with approval. The tactics used by this firm proves that neither internal nor external factors may be ignored.
To conclude, the policies pursued by the enterprises significantly depend upon the circumstances in which these firms operate. Very often, internal factors (the operation expenses, marketing objectives, cost-effectiveness, quality of the products) shape the decisions. Still, we have to emphasize the idea that a successful pricing strategy always considers both internal and external factors.
Bibliography
- Avlonitis. G. Indounas. K (2005). Pricing objectives and pricing methods in the services sector. Journal of Services Marketing, vol 19, (1), pp 47-57.
- Daly. J. L (2001). Pricing for profitability: activity-based pricing for competitive advantage. John Wiley and Sons.
- Cusumano. M. Selby. R (1995).. Microsoft secrets: how the world’s most powerful software company creates technology, shapes markets, and manages people. Free Press.
- Kotler. F (2008). Marketing Management (International Students). Pearson/Prentice Hall.