Question

Why is finding and implementing the right pricing strategy critical to a company’s success? Provide an example. Also needs to be one page long and have two references.

Answer 1

answer-

pricing is very important because it is the main factor to earn profit on the sales of the products or services of a company.it is the main task of marketers to choose the right pricing strategy for its products or services. Your pricing strategy involves evaluating the price you will charge for your product or service, and how this price fits in with your overall marketing plan. Unlike advertising, which overtly disseminates a message, pricing provides a subtler cue about your company, attracting a particular demographic or making a statement about your product's value. A pricing strategy is also a practical matter because your company cannot succeed if you do not earn enough to cover costs.

The price you set affects your profit margin per unit sold, with higher prices giving you a higher profit per item if you don’t lose sales. However, higher prices that lead to lower sales volumes can decrease, or wipe out, your profits, because your overhead costs per unit increase as you sell fewer units.

One of the most obvious affects pricing will have on your business is an increase or decrease in sales volume. Economists study price elasticity, or the response of consumer purchasing to a price change. Increasing your prices might lower your sales volume only slightly, helping you make up for decreased volume with higher total profits generated by higher margins. Lowering your prices can increase your profits if your sales jump significantly, decreasing your overhead expense per unit. Test the market’s response to price increases by changing prices in targeted areas before instituting an across-the-board price increase

The price you set sends a message to some consumers about your business, product or service, creating a perceived value. This affects your brand, image or position in the marketplace. For example, higher prices tell some consumers that you have higher quality, or you wouldn’t be able to charge those prices. Other consumers look for low-priced products and services, believing they’ll get the quality they need at a low price.

Offering sales, discounts, rebates and closeouts can send the message you can’t sell your products or services at your regular price, or tell buyers they have a short-term opportunity to get a bargain.

for example- If your products are having many substitutes and competitors also provide same products with same features and you charge high price for that competitors charged lower prices so your sales would be less and your business would suffer loss. so in this situation, the company can adopt low cost pricing or competitive pricing for its products.

so, company has to make sure that they put right prices for their products or services so that they can create value to customers as well earn proper profit on the sales.

References-

Gregson, Andrew. Pricing Strategies for Small Business 2008 Self Counsel Press.

5 Reasons Pricing Strategy is Increasing in Importance . (2016, 03 27)

Ian, Yeoman, (28 October 2009). "What will consumers pay more for? Luxury markets and premium pricing"

*hope above answer would help you.