Pricing strategy is bringing profitable growth through offer plan, improved communications that enable the firm to maximize its profits for units sold. Pricing strategy impacts the customer’s decision whether to purchase or not purchase the product. Geographical position, cost of production, legal consideration and revenue are some of the factors that help determine the pricing of a product.
Petroleum has a large market. There are three types of petroleum refineries: hydro-skimming, complex and topping. Topping refineries are the simple type of crude oil refineries. They are only able to single out crude oil into light gas, refinery fuels, and other distillates. Hydro-skimming refineries produce diesel fuel and gasoline. Complex refineries produce a broader variety of end products, including feedstock for various markets (Lin et al, 2003).
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Petroleum has several life cycle stages, exploration is the first stage. Geophysicist and geologist search for oil and gas under the earth surface. The appraisal is the second stage, the purpose of this process is to determine the size and the properties of the gas or oil discovered. Development is the third stage, where it is determined how the mining is going to be done. Then there is production, it is the last stage where hydrocarbons are removed from the oil or gas (Grant et al, 2016).
There are several factors that help determine the pricing of the product. Cost of production is one the factors, if the cost of production was high the firm will set high prices to maximize profits. The geographical position of a station determines the pricing. If the store is easily accessible the prices might be a bit higher than others. The government sets a range of prices for a product that firms should not exceed to prevent overpricing (Lin et al, 2003).
In conclusion, product pricing strategy works, it enables the firm to maximize profits and prevents overpricing of a product, and this enables the firm to stay relevant.
References
Lin, C. C., Peng, H., Grizzle, J. W., & Kang, J. M. (2003). Power management strategy for a parallel hybrid electric truck. IEEE transactions on control systems technology, 11(6), 839-849.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
