“Should Wal-mart use loss leader pricing?”

"Should Wal-mart use loss leader pricing

The four

's of a marketing mix , product , promotion , packaging and price are of great importance . They form the basis as to where the product will be sold to achieve the most advantage , before the product is launched the marketing strategy is formulated and there is usually a trade-off between the product quality or price , this invariably becomes a deciding factor as to where and how the product will be positioned in the market . A minimum price is decided by looking at the costs and the

br estimated demand for the product also , it should focus on the competition on the market and their prices , the company 's objective , the target group and if they can afford the price and whether they are willing to pay or not . A break-even is calculated and a minimum price level can be set . Pricing is an important aspect of the product because if the price is not right , the target market might go elsewhere for the good . Pricing is one of the most important elements of the marketing mix , as it is the only mix , which generates a turnover for the organization . The remaining 3p 's are the variable cost for the organization (http /www .learnmarketing .net /Price .htm ) Before deciding on a pricing strategy the company should decide the reason for their price being too high or low . There are certain objectives which the company wants to achieve by setting a certain price , these can be profit maximization , revenue maximization , maximize quantity sold maximize profit margin , quality leadership , survival in the market , cost recovery and status quo (http /www .netmba .com /marketing /pricing

To meet these objectives different pricing strategies are adopted . The firm can either adopt a price skimming policy or a penetration pricing policy . In price skimming a higher price is set , the objective is profit margin maximization . This policy is most appropriate when the expected demand is inelastic , it is expected that there will be high cost savings at high prices and /or when the company does not have the resources to finance the large capital expenditures that are required for a higher volume production

Penetration pricing is for when the company 's objective is to maximize the number of goods sold in the market . The price is set lower than the competitors or equal to his price . This policy is most appropriate when demand is expected to be highly elastic , decreases in cost are expected as the volume of goods produced increase , the product can gain mass appeal quickly and is a threat to the competition (http /www .netmba .com /marketing /pricing

The pricing objectives depend on many factors such as : production cost economies of scale , barriers to entry , product differentiation , rate of product diffusion , the firm 's resources and the product 's price elasticity of demand . To achieve the objectives there are methods which correspond with the pricing policies discussed earlier . There is cost-plus pricing , target-return pricing , value-based pricing and psychological...