Pricing Essay Example | Topics and Well Written Essays - 1000 words

Pricing - Essay Example In this method, the values of all the inputs applied when developing the product are summed. The other method is the value based method. This focuses on the values of the product. In this method, the value of the product is the extent of the customer's satisfaction and, therefore, forms the criteria for price setting (Smith 145). Value based method would be appropriate for this case since there is no competition in the market. Mark-up approach and the fixed percentage approach would also do for this same reason that there is no competition in the market. Therefore, balancing out on the application of these methods in price setting would be appropriate. Competition based method would not be relevant in this case since there is no competition in the market. Price skimming strategy will fall as one of my consideration. This is mainly because the product is new and does not have a replica of it in the market. For this reason, the market prices must be higher than what other existing prod ucts cost (Smith 289). The new product is of a higher quality with higher demand due to the additional features; this justifies the reason for giving it a higher price. On the other hand, I must consider how the consumers perceive higher prices and what their take on increased prices could be. The bottom line in this consideration is that high prices can be set initially and well accepted, while it may not be easy to hike prices at a later date. Beginning the sales of a new product at a high price is more advantageous. The quality of the product in this case being high would justify the high prices. The new machine is one of its own; hence, the competitors are kept away already for setting new competition on the product. In this case, I would not apply the market penetration pricing since there is no competition. The fact that this product is unique makes it more appropriate for me to set higher market prices since building demand quickly will not be affected because it is not produ ced by any other competitor. It would also be necessary for me to choose tactics that would go well with both the company and the customers. As such, quantity discount would deem necessary for a higher rate of stock flow to be realized. The timing of such high quantity purchases must be put into consideration before I offer such discounts. Having the mind of the customer at the point of price setting would become necessary for me. This will be in terms of how the customers perceive the product and the feeling they may develop over the new products and the set prices (Smith 68). This psychological aspect in price setting may help in developing a notion of how the customers would react to certain prices. Internal and external reference prices would apply in this case. Odd prices will be considered as the customers would most likely perceive the prices to be low. The number 9 at the end is the trick to be applied in this case when pricing. Zone pricing would apply considering the cost of shipping. The product would cost much more for consumers who are located far away from the manufacturing zone. Bundled purchases would be given a discount on purchases. For those who buy the washing machine and other products within the company get a discount. These are aimed at ensuring a high number of purchases of the company products with the help of having the new product in the market. Long-term and short-term pricing tactics would contrast in this case. The short-term strategies would be mostly responsive to the prevailing conditions