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Problem

A business marketing manager often has great difficulty in arriving at the optimum price level for a product. First, describe the factors that complicate the pricing decision. Second, outline the approach you would follow in pricing an industrial product. Be as specific as possible.

Step-by-step solution

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Step 1/3

Pricing decision is an important and a complicated decision for any marketing manager. Business marketers have to consider several factors before making the pricing decision.

The cost price of the product, the profit margin and the selling price of the product are needed to be taken into consideration before pricing a product.

Step 2/3

Following are the factors that complicate the pricing decision:

• The marketers should be aware of the paying capacity of the consumers. The price of the product should be fixed at a level where the customers are satisfied in paying the price of the product.

• The marketers should also take into consideration the cost of manufacturing of the product before setting the price of the product. The cost of the product should not be stretched too high so that it would become difficult in setting the selling pro\ice of the product.

• The extra cost used manufacturing the product should also be included in setting the selling price of the product.

• Competitor pricing for the same type of product should also be kept into consideration before making pricing decision.

Step 3/3

The approach to be followed in pricing of industrial product is given below:

• The total cost associated with manufacturing of the product should be determined.

• Market research to determine the customer’s willingness to pay for the product should be also carried out.

• A research regarding the competitor’s pricing for same type of product should also be done.

• The number of alternatives available in the market and their pricing for the similar types of the products should be gauged in order to arrive at the actual pricing decision.

Based on the above information company should price the product which should prove to be reliable and competitive.