Basis for Pricing the Product

Content

I. Price…………………………………………………………………………3

II. Marketing mix within EU…………………………………………………5

III. Market segmentation……………………………………………………....9

IX. Ansoff matrix………………………………………………………………12

X. Agents………………………………………………………………………15

XI. Bibliography……………………………………………………………….17

I. Define price and explain the basis for pricing the product.

Introduction

Price is one of four elements of the marketing mix and defined as

“The value of a good or services for both the buyer and seller in a market exchange”. (Karl Marx, 1865)

The price of the product shows the fairness of an exchange when a buyer is satisfied with the product or service, and seller with the source of revenue. Why is price so important for the company?

Price sets the value level for company's products or services and is a key factor in finally determining the revenue. The price charged has to cover all costs and efforts invested into the other three Ps - product, place and promotion. The company can change the price quickly in response to rapid changes in the marketing environment and with greater price awareness, global competition, rising cost and deregulation of industries price is very important. Price determines buyer choice because it represents the total value of the product and linked to the product’s quality. The pricing strategy is an important part of the product life cycle as the product moves through different stages the prices consequently vary. Different prices target different markets and the pricing decision making coordinates with manufacturing, finance, marketing and all the other functions of the company. (1)

According to traditional economic beliefs price is a powerful tool for managing sales and demand. Economists have long recognized the relationship between the quantity demand and different price levels. For some products the price drop can lead to a large increase in demand and for others stimulate less demand. The economist traditionally use the demand curve as a useful concept when thinking about pricing however in practice setting the prices this way is problematic. It is difficult to draw an accurate demand curve due to changes in product, advertising