Gurus On Marketing

The role which pricing plays in marketing strategy differs essentially
from the roles of the other elements – product, promotion,
and distribution – which are a firm’s attempt to create value in the
marketplace. Pricing is the firm’s attempt to capture some of the
value in the profits it earns. If effective product development, promotion,
and distribution sow the seeds of business success, effective
pricing is the harvest. While effective pricing can never compensate
for poor execution of the first three elements, ineffective pricing
can surely prevent those efforts from resulting in financial success.
Regrettably, that is a common occurrence.’
Many companies fail to price effectively because they do not adopt
marketing perspective in their pricing strategy. It is important to
understand how customers make their buying decisions in order to
formulate effective pricing.
Pricing strategy should involve external perspective as opposed to
internal perspective, i.e. looking at its own internal needs.
Nagle examines two methods of cost-based pricing – mark up pricing
and target-return pricing – and shows how such an internal focus
deviates from meeting market needs.
Effective pricing should consider:
• Consumer behaviour
• Co-ordinating pricing with new product development.
• Understanding a product’s pricing environment. Understand
likely action of competitors.
• Understanding costs and the issues involved in relation to
organisation’s costs. What costs are incremental, or forwardlooking
or avoidable?
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GURUS ON MARKETING