Study notes

Pricing Strategies and Tactics - Introduction

Pricing is a very powerful weapon in marketing, but there are many different ways to use it to help achieve marketing objectives. It is important to make a distinction between pricing strategies and pricing tactics

Pricing strategies

These are adopted over the medium to long term to achieve marketing objectives They have a significant impact on marketing strategy.

Pricing tactics

These are adopted in the short run to suit particular situations Tactics have only limited impact beyond short-term sales of the product itself.

It may also be that the pricing strategies a business can implement are constrained by the competitive position of the business.

It is often said that there are four categories of position a business can find itself in which influence the control it has over pricing:

(1) Price taker

Here, a business has no option but to charge the ruling market price.

(2) Price maker

For a price maker, the business has a strong enough competitive position to be able to fix its own price – either higher or lower than the competition.

(3) Price leader

A price leader is often a market leader whose market share is so strong that its price changes are closely followed (and often copied) by rivals

(4) Price follower

A business that just follows the price-changing lead of the market leader (ignoring the rest of the competition)

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