Marketing Mix-Price Task Marketing Mix-Price Introduction Marketing mix is a number of combined fundamentals that are used to market products. It entails the 4ps; ‘product’, ‘place’, ‘price’ and ‘promotion’ (Belohlavek, 2008, 11). This paper aptly looks at the third p; price. Pricing Strategy Faroka Watch Company is a company that sells watches, and apparently aims at maximizing profits while diminishing competition (Belohlavek, 2008, 15). In order to accomplish this, they must put in place a solid pricing strategy that will ensure their products are not over prized, or under prized to ensure they reduce chances of incurring losses.
There are four approaches that Faroka Watch Company can use. 1. Value Pricing The term means charging prices in accordance to the value of products delivered to customers. This strategy is normally referred to as skimming and is to be used at an opportune moment, since the higher the price the higher the sales. This strategy is best used at the initial stage, since customers believe that expensive merchandise are the best. This strategy is mostly thrives on luxury items like clothes and accessories, for example, watches.
Therefore, Faroka Watch Company can consider value pricing although pricing is limited to price elasticity (Belohlavek, 2008, 65). 2. Competitive Pricing Competitive pricing means selling of products at a much lower price than the rest of the producers of similar products. Competitive pricing is aimed at boosting the sales volume and maintaining low costs so as to avoid incurring massive losses to the company. It achieves these sales boosts by attracting a larger number of customers and enhances consumer allegiance. This strategy usually succeeds in a situation where there is a sale of comparable merchandise.
For example, if Faroka Watch Company decides to sell its products in the range of $10-$500 while Rolex Watch Company sells its products from $20-$1000, Faroka watch company will have a higher sales volume than Rolex Watch Company. 3. Cost Plus Profit Cost plus profit means that profit needed from the sale of the products, is added to the cost of manufacturing (Ruskin-Brown, 2006, 169). This strategy is mainly referred to as cost –oriented strategy. For example, if Faroka Watch Company has produced 100 pieces of watches, worth $100 in manufacturing cost.
This means that each watch has a production cost of $10, and they target $10 profit from each watch. Therefore, while deciding on the pricing in consideration of cost plus profit, Faroka Company will add the cost of production plus the target profit, to arrive at $20 per watch. This strategy is preferable to Government bureaus and administrative contracts (Ruskin-Brown, 2006, 169). 4. Break Even Ratio Break even ratio is not a pricing strategy but a pricing awareness strategy that aids in preventing losses and bankruptcy. Correct pricing majorly depends on break even analysis, since it enlightens the producers when a commodity is an exceptional idea or if it leads to bankruptcy.
This is in consideration to the prices charged by rival companies on comparable merchandise. Faroka watch company should analyse the break even ratio to avoid overpricing or under pricing, since both result in poor sales and massive losses to the company (Ruskin-Brown, 2006, 169). Conclusion For any product to boom in the market, manufacturers must perform a marketing mix on their merchandise. Out of the four Ps, that is ‘pricing’, ‘promotion’, ‘product’ and ‘place’; pricing is the key determiner of the sales outcome (Belohlavek, 2008, 11).
Therefore, Faroka Watch Company must mull over the above discussed pricing strategies. Bibliography Belohlavek, P., (2008), Unicist Marketing Mix, Carson: Blue Eagle Group. Ruskin-Brown, I., (2006), Mastering marketing: a comprehensive introduction to the skills of developing and defending your companys revenue, London, Thorogood.