1. Pricing Policies
What are examples of fixed price policies, i.e., using menu-based prices, and what effect do they have on buyers and their perceptions of value?
The fixed price policy is simply a pricing strategy used in setting the price of a commodity within a given pricing block over a given time. A fixed menu of prices in most instances is established where each price will significantly reflect different value options. The major examples include the following: trade-offs, segmentation or even customer’s negotiation power manipulation. This pricing is believed to give potential customers products of high value to ensure that each customer finds the price that they are paying more deserving of the brand or service offered. Focusing on segmentation, the retailer segment the brands using various attributes including location, time of purchase and even the age of potential consumers. On the one hand, this will give the retailer the right to charge higher or even lower; while for customers; they will be able to access the brand mush easily. In a general view, using fixed prices, companies will be in a position to compete for customers using prices. A fixed pricing policy in menu based offerings has further been established to be vital since it eliminates the consumers’ capability to haggle over price enhancing their bargaining power.
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2. Pricing and the Product Life Cycle
Life Cycle of a Product often begins at a new product invention. The product selected for this analysis is a car. Throughout the cycle, there is the need for the pricing policy to be significantly adjusted at various stage of the cycle.
First is the introduction stage. At this stage, a new product is introduced, put in the market then create awareness for it. The introduction comes with increased promotional costs; hence profits will be very low. At this stage, the car manufacturing company will adopt two pricing policy which is skimming and centralizing price policy.
The second phase is Growth. At this stage, the car brands start to gain acceptance in the market and make increasing sales gains as a result of the massive promotion. The brand evidently satisfies the market. Focusing on the aspect of pricing, there is actually minimal differences between the product growth and maturity stage.
Maturity stage is the third stage during which the level of competition increases significantly and sales grow rapidly, but at the same time, the growth is at a diminishing rate, customer numbers decline and competitors adopt mark-down price.
After maturity stage, Saturation phase follows. Here, the company’s sales are believed to be at the peak, but further increase in sales might not be possible. Car’s demand is stable, therefore; pricing is usually full cost in addition to standard markup.
Lastly, we have decline stage, during which the sale of cars diminishes as buyers become tired of these brands. There is increased the level of competition and substitutes. This makes the price be a primary competitive weapon.
3. Performance Measures and Incentives
What measures (sale incentives) would you suggest to motivate the right behavior to increase company profits?
Effective measures are considered necessary when it comes to motivating a right type of behavior designed to increase the business’s profitability. In most instances, the company might not be able to know its status of profitability until the entire operational cycle has been completed. Measuring cash flows from firm’s activities is critical. This will lead to a higher level of real time reporting where the company will measure sales effects since it deals with cash flow level that the firm expects to receive from its operational activity. Studies have found out that those companies that adopt pay-for-performance systems often attain higher productivity and profits. It is worth noting that this system is the most effective compared to praise when it comes to increasing higher performing employee’s retention. Further, the system has been argued to have the potential of enhancing employee’s pay satisfaction.
Merit Pay is one of the best measures to use and entails giving the employees some form of permanent pay raise, and this is often based on their past performance. The performance appraisal system adopted by a company will help determine employee’s performance level and those employees who merits are awarded arise for instance a 3 percent increase in their pay. It is, therefore, important that merit pay is made to be explicitly dependent on employee’s performance to make it more efficient. Further, the company must be in a position to design an objective appraisal system.
