Page 201 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes In their efforts to improve profitability several of Dell’s competitors, including IBM, and
HP are using new approaches for pricing products other than PCs. Dell has recently
acquired selling space within the stores of major retailers such as Sears. As Dell establishes
new distribution approaches, readies new products, and targets new markets, other
companies in the computer industry may have to be more creative and come up with
better pricing strategies to be competitive in the industry.
Questions

1. Study the case and identify Dell’s pricing objectives. What is likely to be the impact
of Dell’s pricing approach on the computer industry?
2. In your view, how should the competitors respond to Dell’s pricing policy?

Self Assessment

Fill in the Blanks:
15. A predetermined percentage of product’s cost that is added to the cost of the product to
determine the price is called the …………………….
16. Competition based pricing is also referred to as …………………… pricing.
17. Hotels, amusement parks and airline companies generally use ………………… pricing
method.

8.6 Summary

Price represents the value that is exchanged in a marketing transaction. A marketer usually
sells a specific combination of need-satisfying product or service, and additional services
like warranty or guarantee.

Pricing should never be seen as an isolated component of a company’s marketing decision-
making. Companies spend large amounts of money on product development, promotion,
and distribution and face risks.
Price is often the only marketing mix element that can be changed quickly to respond to
changes in demand or competitive moves.

Pricing objectives focus on what a company wants to achieve through establishing prices.
These objectives should be clear, concise, and understood by all involved in pricing
decisions. Pricing objectives affect decisions in various other functional areas such as
finance and production etc.

A number of different internal and external factors affect pricing decisions and this may
pose some complexity. In general, there is uncertainty about how consumers, competitors,
resellers etc. would react to prices.

There are specific pricing strategies like price skimming, penetration pricing, loss leader
pricing, superficial pricing, special event pricing, psychological pricing, etc.

Prices can be decided by analyzing the firm’s costs through different pricing methods like
full cost methods, target return pricing method and marginal cost method. These methods
do not take care of the market condition and current market structure for making a decision.

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