Pricing Strategy and Tactics The firm sets an initial price and then adjusts it to reflect various factors in the environment. Pricing a new product. A firm's strategic approach to pricing depends in part on

12.2. External Factors in the Pricing Process Most pricing decisions are driven by factors external to the organization. These factors may significantly limit the freedom of the organization in determining the price, may not have a visible

Pricing methods The pricing method is determined on the basis of an analysis of the state of demand, production and sales costs, and the level of competition. There are several pricing methods: cost-based, target profit-oriented,

Pricing Strategies Pricing strategy is the definition of a possible change in the initial price of goods, depending on the goals of the enterprise, its capabilities and market conditions. Pricing strategies can be differentiated depending on

Pricing Issues The importance of the issue of "correct" pricing does not require explanation and evidence. We confine ourselves to indicating the main objectives of pricing.? Achieving the maximum attractiveness of the store at prices for target customers.? Security

3.2 The Cost Pricing Model Those of the Russian firms that are leading the way in market transformation have already passed the stage of a return to cost pricing and, having moved on, have gradually begun to master marketing approaches to solving this problem.

11.7 Factors Restricting Freedom of Retail Pricing When making retail pricing decisions, store owners have to consider a number of factors that limit their freedom to set retail prices. In reality, these factors are capable of quite severely

The concept of price and pricing

Any business entity in a market environment must develop optimal system setting prices for their products. In an effort to maximize revenue, it is still necessary to pursue a flexible pricing policy, since the influence of demand on the price of an economic good produced in a competitive environment is increasingly increasing.

Definition 1

Price is the monetary expression of the value of the produced economic good.

The price of a product must meet two conditions at once: covering production costs, to form the profit of the seller; meet the needs of the buyer in terms of value and quality.

Pricing is a mechanism for taking into account all factors influencing the formation of prices for the manufactured product.

Pricing tasks

When choosing a pricing strategy, first of all, the management of an economic entity should determine the goals that their products will solve when they enter the market.

The main tasks that may be faced by the leadership can be identified:

1. Increasing profits at a certain point in time (in this case, demand is studied and production is concentrated on a more expensive product that satisfies demand).
2. Increase in market share (there is a decrease in product prices to expand demand).
3. Improving the quality of products (the uniqueness of the product is created, while prices rise to cover costs).
4. Survivability (in crisis situations, prices are reduced to maintain market positions).

Pricing Factors

Price is a complex economic parameter. The more clearly the management of an economic entity determines the variety of factors that affect the production chain of their product, the more accurately the price of products will be determined, taking into account the tasks facing the management. In general, the whole variety of factors affecting the pricing of any economic entity can be divided into three groups:

• basic (production costs, cost formation);
• changeable (factors that are influenced by changes in the economic indicators of the market);
• regulated (factors of state influence on the country's economy).

Remark 1

Also, pricing factors can be conditionally divided into internal and external. Internal factors include factors that can be controlled by the management of an economic entity. External include uncontrolled but predictable changes in the national and international markets.

Internal factors:

1. Cost management. Each entity in its economic activity seeks to minimize production costs in order to increase its ability to compete in the market, including in the price range.
2. Product line development. The profitability of the enterprise is distributed to all types of manufactured products. For the effective functioning of an economic entity, it is necessary to control the profitability of each group of goods, and focus production on more profitable goods.
3. Market research. Development of marketing strategies, constant analysis of market dynamics, control and analysis of competitors and their advantages or disadvantages.
4. Efficient use of own and borrowed financial resources.
5. Improving the structure of the economic entity itself. This may include finding new more profitable suppliers, developing less expensive production technologies, changing distribution channels to less expensive ones, etc.

External factors:

1. Government price regulation. It is used for certain groups of goods, while threshold limits for prices for goods can be set.
2. Changes in the legal, tax policy of the state.
3. Customs costs.
4. Fight against monopolies.
5. Inflation.
6. Changes in consumer preferences.
7. Jumps in the currency markets.
8. Changes in world prices for certain commodity groups.
9. Changes in the stock markets.
10. The emergence of difficulties in international political relations between countries.

External pricing factors cover various aspects of the functioning of the market system surrounding the firm. Each entrepreneur tries, as far as possible, to expand his sales market with the help of pricing policy, or at least to keep it. Modeling your market is always associated with great difficulties due to the variety of factors, their interaction, inconsistency, probabilistic nature and complexity of accounting.

The most important market force influencing price levels is consumers goods. The number, structure and behavior of consumers are central to the pricing policy of the selling firm. Even the monopolist cannot ignore this factor by setting the price on the demand line.

The consumer's attitude to price can be seen as a process of price perception and recognition. Both aspects include many different factors, and not only of an economic nature. Consumers make decisions not only rationally, but also purely emotionally: they often do not have any clear preferences that economic theory speaks of, but buy spontaneously. Sometimes price is a determining factor in consumer choice, sometimes it does not play any role. The consumer can choose a product because of its high price and be proud valuable purchase or, conversely, make a choice in favor of the cheapest product.

In this regard, price theory is increasingly beginning to include models of the theory of consumer behavior, including not only direct, visible links "price level - sales volume", but also internal motives, due to the personality of the consumer, forming an attitude to the price of the goods.

Next, there is a need to define characteristics of your target market. A market is defined as an economic place for the exchange of certain goods, i.e. limited materially, territorially and in terms of the number of participants, a place for the sale of goods and services. For the purposes of pricing, it is necessary to determine the boundaries of your target market, the relationship of competition and the characteristics of demand in it as accurately as possible.

From the point of view of the product characteristics of the market and the prospects for its development, it is important to determine the phase of the life cycle of the product and the market as a whole, the degree of demand saturation. Depending on this, for example, the possibilities of using price competition are determined.

In addition, for the purposes of pricing policy, the firm must have basic information about the product:

• the nature of the need for the product and the price elasticity of demand for it, including cross elasticity. Thus, for essential goods (for example, medicines), one often observes a decrease in direct price elasticity and an increase in cross elasticity;
• duration of product use. For example, durable goods such as furniture, cars and others have special pricing requirements. The consumer can postpone the purchase, expecting more favorable conditions for himself, in particular, lower prices. This increases the price elasticity of demand, but at the same time reduces the dependence of prices on market fluctuations;
• dependence of demand on the season and fashion. Particularly fashionable goods and goods during the peak season are sold at higher prices, otherwise a special system of price differentiation is needed;
• price position (niche) occupied by the product. For expensive goods designed for the effect of exclusivity, for goods with an average price level, and, finally, for cheap goods, the consumer has certain associations with the quality of a product or service. This can be decisive for the consumer's reaction to price changes. Thus, it is not uncommon for a fall in the price of expensive goods to cause a fall rather than an increase in demand for them. Price becomes an indicator of quality.

The most important external factor in pricing is the degree of competitiveness, or perfection, of the market, i.e. its form and, accordingly, the form of competition and pricing that dominates it. To understand this, a certain classification is used according to the number of market participants and other features, which will be disclosed later.

Characteristics of competitors - it is also far from being an easy issue requiring a lot of marketing and analytical work. However, a proper understanding of your main competitors allows you to anticipate the direction of their reaction to price changes, as well as their pricing policy.

Therefore, it is necessary to study the modes of market behavior of competing sellers, as well as consumer preferences, related and not related to prices, manifested in the choice of a particular product model.

It is important to specifically study the pricing policy of competitors in order to identify policies price leader, the interdependence of pricing of the main market players - oligopolists, as well as the degree of price independence in competitive markets.

If this work is done, then the nature of price competition in the market becomes clear. What, for example, is behind the price aggressiveness of a competitor? Usually this is a desire for dominance in the market, calculated on the suppression of other leading participants by one firm. However, in modern conditions, entrepreneurs can act on the market both as competitors and as cooperative partners connected by a certain strategic alliance. In this regard, they even speak of a certain “meso-level” of competition between some groups and others. In this case, price competition in the industry will follow a different, unlike scenario.

Another example is Internet e-commerce, which restructures distribution channels and allows merchants to compete directly, horizontally with their own partners, merchants who sell this species goods to the same group of consumers. This leads not only to conflicts, but also to problems in pricing.

Competitors of the same market operate, as a rule, in different price segments (high, medium and low prices). When trying to move from one price segment to another, the existing competitive equilibrium is often disturbed and a situation arises. "competitive asymmetry" when goods of higher quality are sold cheaper than goods of lower quality. This, in turn, leads to increased price competition. In principle, the reaction of competitors to price changes by one company will be the stronger, the more their interests are affected, i.e. the closer a competitor company approaches their market. Therefore, it is so important to correctly determine the real number of market participants in each price segment.

Since manufactured goods are sold on the market by direct manufacturers, wholesalers, and retailers, a complex structure develops in each market. horizontal and vertical competition. Horizontal competition - between producers of goods for one market; vertical - between manufacturers and traders, as well as between trade at different levels (wholesale, small wholesale, retail); finally, horizontal competition - between different trade enterprises of the same level. Horizontal and vertical competition are thus closely related.

Pricing conditions and factors also include macroeconomic environment - a system of factors of macroeconomic dynamics that influences the pricing of the firm. This is the state of the general macroeconomic situation (for example, the phases of the economic cycle - an upturn or a crisis), and foreign economic regulation (free movement of goods or imposed with high duties that increase the cost of goods), and the degree of inflation (difference between nominal and real prices, changes in the general price level) , and the tax system (for example, excise taxes directly included in the price of goods), and state antimonopoly regulation (price caps or regulation of profitability), and state pricing in natural monopoly industries (regulation of prices and tariffs for fuel and energy resources, which determines the level of costs ), etc. Even the political situation can affect the company's pricing policy through certain expectations and forecasts of economic decisions (for example, decisions on the restructuring and privatization of natural monopoly industries, on strengthening or, on the contrary, weakening state control over prices).

Of great importance in pricing are the general innovative environment in the economy, the state and dynamics of innovations, and not only in their industry, but, say, in the field of technical support for the production process (technology, mechanics, electronics) or in the production of substitute goods.

Social processes in society, and not only a change in the level of income (i.e., purchasing power and hence demand), but also the moods, tastes, ideals of the social stratum that personifies the typical consumer of this product, the development of fashion - all these are also important macroeconomic pricing factors that determine the dynamics of demand and prices of goods. Objective price differences are reflected in the subjective perception of prices by many consumers in different ways, depending on the factors that the seller of the goods must determine and take into account.

The most important condition for pricing is the existing price environment in the industry or industry segment of the market. This means that in order to make the right pricing decisions, it is necessary to have a good understanding of the price levels, as well as the forms of price and non-price competition applied in the market relevant to the company. Price competition is competitive struggle through changes in the prices of goods. Usually they resort to lower prices, but for this, in comparison with competitors, it is necessary to have lower total costs. Before declaring a price war, you should carefully assess the margin of economic stability in yourself and your competitors. Otherwise, a situation is possible when the one who unleashed a price war in it will lose. Therefore, a price war is a difficult and possibly ruinous business. If competing organizations are in approximately equal conditions, then a price war is not only wasteful, but also meaningless. With non-price competition, the role of price does not decrease at all, but the properties of the product, the prestige of its brand, the level of service and other factors come to the fore. With non-price competition, the entire potential of the organization is aimed at quality and customer service. The policy of creating and promoting the brand is being developed.

All tourism service providers began to realize that their profits were in the tight grip of competition for best price and the best quality. The price performs exclusively important function which consists in receiving proceeds from the sale. The achieved commercial results ultimately depend on the pricing strategy, and the right pricing policy has a long-term and decisive importance both for the competitiveness of tourism products and for the activities of the enterprise as a whole.

In a market economy, enterprises tend not to succumb to the elements of the market, but they themselves try to form prices that are beneficial to both them and consumers, that is, to pursue their own pricing policy.

Price policy is a system standard rules determining the price of a tourist product during its formation and implementation. Price policy can be developed for a long time and adapt to changing market conditions. It is advisable to use a flexible approach to pricing, i.e. the price must be flexible and dynamic.

The relevance of the problems of developing a pricing strategy in the activities of travel companies is associated with the following factors:

Pricing is the most important element of the marketing mix, an important management tool that allows you to form the amount of profit of the enterprise;
- the free setting of prices for a tourist product is associated with the solution of a number of methodological problems: how the price is formed in market conditions; what selection criteria can be used; what is the procedure for regulating prices by the state;
- most small and medium-sized tourist organizations do not have sufficient resources to actively use non-price competition methods;
- the market of tourist services, in fact, is a buyer's market; the price in marketing activities performs an important function - the coordination of the interests of the tourist organization and the client.

The choice of a pricing strategy, an approach to determining the price of new tourism products, price regulation for existing ones are integral part marketing activities of tourism companies. The development of pricing policy is carried out taking into account external and internal factors in the development of a tourist organization.

External factors:

The ratio of supply and demand;
- level and dynamics of competitive prices;
- state regulation of both the economy in general and the tourism sector in particular;
- political situation;
- consumers, their ability to pay, interests, habits, tastes.

Price setting is largely determined by the image of the tourist enterprise. A travel agency, offering its services, must first of all take care of how its tourism products will be perceived by consumers. Therefore, when developing a pricing strategy, a tourist organization must take into account the image perceived by customers, since the more authority a travel agency has, the more trust and popularity its services enjoy.

Different consumer groups perceive the image of the company in different ways, since the requests and requirements for the level of service are differentiated. Therefore, the pricing strategy should determine the nature of the relationship with each individual segment of consumers. So, a small travel agency may be perceived with distrust by customers with high level income. At the same time, less wealthy tourists will be happy to use its services. The travel agency should orient its pricing strategy in such a way that the services offered to different groups of clients would correspond in quality and price to the image of the tourist organization perceived by them.

Internal factors (pricing targets):

Maximization of the current profit from the formation and implementation of the tourist product;
- holding positions in the market;
- Achieving leadership in the quality of tourism products;
- gaining and maintaining leadership in the market of tourist services;
- the desire of the tourist organization to increase the growth rate of formation and implementation, even at the expense of a decrease in income;
- the desire to raise their image (prestige);
- the interest of the tour operator and travel agent in increasing their share in the market of tourist services;
- the desire of the tour operator to evade the accusation of monopolization;
- the desire to avoid bankruptcy.

To develop an appropriate pricing strategy, the tourism organization must first establish pricing objectives. These goals are largely visible already from the very positioning of the tourism product in the tourism services market. The goals follow from the analysis of the position of the travel agency in the market and its overall goals in the market. Pricing objectives should not be considered in isolation. They are designed to contribute to the successful implementation of the marketing strategy of the tourism organization.

Setting the goal of its pricing strategy to maximize current profits, the travel agency, as a rule, does not think about the possible strategic consequences that may arise as a result of both thoughtful responses from competitors and the impact of various market factors. The goal of maximizing current profit is quite common in conditions where a tourism organization offers unique services that are not available from competitors, or the demand for this type of tourism product significantly exceeds supply. The price set in this way is perceived by the market, even if it does not clearly reflect the real cost structure associated with the provision of services. Setting the goal of maximizing current profit without taking into account the likely reaction of the market may adversely affect the activities of the travel agency in the future.

In conditions of high saturation of the tourist services market, a situation may arise when a tourist organization will be interested in selling its tourist products at any price, just to keep its position in the market. In such a combination of circumstances, travel agencies often do not consider the cost structure at all and in some cases carry out the sale of goods even at a loss. This approach cannot be sustained for long. Careful analysis of the cost structure and setting of pricing targets are required in such a way as not only to maintain its market position, but also to receive at least a moderate profit.

By choosing the goals of the new strategy aimed at achieving leadership in the quality of the tourism services offered, firms seek to outperform competitors by maximizing the quality characteristics of their activities. Improving the quality of tourism products means increasing their prices. And if such an increase is considered by consumers as quite acceptable, then the tourism organization can successfully get away from competition.

The goals of the pricing strategy, designed to gain and maintain market leadership, are implemented at the earliest stages of the life cycle of new tourism products. Prices are calculated based on a precise definition of the cost structure. Such prices allow for quite a long time to work with sufficient profit, are available to consumers and do not cause competitors to compete for a leading position in the market.

After defining the goals, a pricing method is selected. Note that when a tourist product has not yet been released to the market, the price is determined pre-market, only based on the freedom of the travel agency in the pricing process and its goals.

In aggregate, the price of a particular tourist product is determined by the mutual action of three groups of factors: individual costs incurred for the formation and sale of the tourist product, the state of demand and the level of competition in the tourist services market.