A price is an expression of value. The value rests in the utility and quality of the product itself, in the image conveyed through promotional activities, in the availability of the product through distribution channels, and in the service derived from it. A buyer has many uses for his limited budget, and the price of a particular product or service must be measured against the prices and utility of other products and services.
From the perspective of a seller operating in a highly competitive environment, pricing decisions are paramount. If the price is set too low, the seller will not make a sufficient profit to remain viable. A price that exceeds consumers’ valuation of the product will lead to very few sales. Hence, where the price should be set is between the cost of production and customer value. This aspect is a critical decision facing the firm. Decision makers often face the choice in the early stages of the product life cycle of pricing high to maximize short-term profits, or pricing low to establish market share to benefit from economies of scale. Ultimately, the pricing decision will depend on what the firm is trying to accomplish with its pricing system. Different pricing strategies are useful in some situations and less useful in others.
An interesting number of private companies and nonprofit organization are employing dynamic pricing to maximize profits and/or revenues. Your tasks are:
Select one company or an industry for which adequate information is publicly available referencing its pricing strategies. You can select a principal product/service, a class of products/services, or the general pricing strategy of the selected entity.
1. Describe the history and background of the company.
2. Describe the present market reality, market structure and/or power, in terms of sales, industry leadership, and profits for selected firm, if one particular firm is selected.
3. Present and discuss its pricing strategy in terms of the product life cycle if applicable.
