Pricing policy: types, formation, examples. Pricing policy of the organization Choosing the pricing policy of the enterprise

Pricing policy is one of the most important areas of activity of an enterprise, indicating its effectiveness.

You will learn:

• What types of pricing policies are there depending on the type of market.
• How to choose a pricing strategy.
• How the company's pricing policy is formed.
• How to analyze pricing policy.
• What mistakes lead to ineffective management of a company's pricing policy.

What is the essence and goals of pricing policy

If free pricing is not possible, there are two options. The first is a strict limitation on the scope of natural prices. The second is allowing their free movement, but with regulation at the state level. When defining the objectives of a pricing policy, an enterprise must clearly understand what exactly it wants to achieve with a particular product.

The main goals and objectives of pricing policy throughout the entire market are to stop the decline in the production process, limit the rate of inflation, stimulate entrepreneurs, and increase profits through the production of goods rather than their prices. If a company knows exactly in which market it will promote its product and how best to position itself in a competitive and consumer environment, then it is much easier for it to form a set of marketing activities, including thinking through pricing, because the development of a pricing policy mainly depends on how the company plans to position itself in the market.

At the same time, the company may pursue other goals. If she clearly represents them, then, of course, she knows better what pricing policy suits her. Example: a company may strive to survive among competitors without losing its current position, increase revenue, become a market leader in its industry, or produce the highest quality product.

If a company has intense competition, then the main goal should be survival. To ensure normal operation and sales of their products, enterprises have no choice but to sell goods at low prices in order to achieve customer loyalty. Here the primary task for them becomes survival, not increasing income. As long as the reduced prices cover costs, companies in financial difficulties can somehow stay afloat.

The main goal for many companies is to maximize current income. Enterprises in this category study demand and production costs in relation to different price levels and settle on an acceptable cost that will help maximize current income and cover costs as fully as possible. If this is the case, it means that the company is primarily focused on improving financial performance and that these are more important to it than achieving long-term goals.

Enterprises of another category strive for leadership in the industry, guided by the fact that companies that occupy first positions operate with the lowest costs and the highest financial performance. Striving for leadership, companies reduce prices as much as possible. One option for this goal may be the desire to achieve a specific increase in market share, which is the essence of the pricing policy of such enterprises.

Some companies want the quality of their products to be the highest among their competitors. Typically, luxury products are priced quite high to cover production costs and expensive research.

Thus, pricing policy is used by firms for different purposes, for example to:

• increase sales profitability, that is, the percentage of profit to total sales income;
• increase the return on the company's net equity (the ratio of profit to total assets on the balance sheet minus all liabilities);
• maximize the profitability of all company assets (the ratio of profit to the total amount of accounting assets, the basis for the formation of which is both own and borrowed funds);
• stabilize prices and income levels, strengthen market positions, that is, the company’s share of total sales in a given product market (this goal may be especially significant for companies operating in a market environment where the slightest price fluctuation causes significant changes in sales);
• achieve the highest rates of sales growth.

Expert opinion

Price is not the main indicator that determines the buyer's choice

Igor Lipsits,

Professor, Department of Marketing, State University Higher School of Economics, Moscow

Many companies believe that it is the low price that, more than other indicators, influences the consumer’s decision to purchase a product. Such enterprises believe that by lowering the price they can increase sales. But that's not true. In fact, if the seller acts according to this scheme, the buyer thinks that the only advantage of the product is its low cost, and therefore does not pay attention to other important characteristics - quality, uniqueness, service.

The best option here is to increase the cost relative to competitors’ products, but at the same time draw the buyer’s attention to uniqueness, service, quality and other indicators that are important to him.

How to beat your competitor in a price war: 3 strategies

In an effort to maintain consumer flow, we often get involved in price wars. However, the blind, thoughtless implementation of such a strategy often leads to a significant loss of profit. The editors of the Commercial Director magazine have identified three strategies for winning price wars.

Types of pricing policies depending on the type of market

The organization's pricing policy is largely determined by the type of market chosen to promote its products. Below we will look at four of its types. It should be noted that each of them has individual pricing problems:

1. Market of pure competition.

In a purely competitive market, numerous sellers and buyers of similar products interact. Individual producers and consumers have almost no influence on current market prices. The seller does not have the right to set higher prices than market prices, since buyers are free to buy goods in any quantity they need at the existing market value.

In a purely competitive market, sellers do not devote much time to the long-term formation of a marketing strategy. As long as the market remains a purely competitive market, the role of marketing research, product development activities, pricing policies, sales promotion and other processes is limited.

2. Market of monopolistic competition.

This type of market has its own specifics. A large number of sellers and consumers interact on it, making transactions not at a single market value, but at a wide range of prices. Their range here is quite wide. This is because sellers can offer consumers products in a variety of options. Specific products have different characteristics, design, and quality. Services associated with products may also differ. The consumer understands the features of different offers and is willing to pay different amounts for them.

To stand out with something other than price, companies develop many offers for individual customer groups, actively assign brand names to products, conduct advertising campaigns, and use personal selling methods.

3. Market of oligopolistic competition.

In an oligopolistic market there are few sellers. Each other's pricing policies and marketing strategies cause quite a strong reaction in them. Sellers cannot significantly influence the price level, and for new applicants, penetration into this market is a rather complicated process. Therefore, competition here for the most part is not related to prices. Sellers strive to attract buyers in other ways: by improving product quality, conducting advertising campaigns, providing guarantees and good service.

Every seller operating in an oligopolistic market knows that if he lowers his price, others will certainly react to this. As a result, the demand that has increased due to the reduced cost will be distributed among all companies. The company that lowers its price first will receive only a certain percentage of the increased demand. If this company raises its price, others may not follow suit. Accordingly, the demand for its goods will decrease much faster than would happen with a general increase in prices.

4. Pure monopoly market.

In a pure monopoly market, producers control prices very carefully. The seller here is either a public or private regulated or unregulated monopoly.

A monopoly at the state level can pursue a certain pricing policy to achieve different goals. For example, setting the price for products that are important to the buyer below cost makes them more accessible. If the goal is to reduce consumption, the price can be set very high. The goal may also be to cover all costs and make a good profit.

If the monopoly is regulated, the state allows the enterprise to set the price, subject to certain restrictions. If the monopoly is unregulated, the company has the right to sell the product at any price, the maximum allowable under existing market conditions.

But monopolists do not set the highest possible prices in all cases. The law of demand states that when price increases, demand decreases, and when price decreases, demand increases. “Pure” monopolists remember: in order to sell an additional quantity of a product, it is necessary to reduce its cost. That is, a monopolist cannot set an absolute price for its product. He does not want to attract the attention of competitors, trying to conquer the market as quickly as possible, and is wary of introducing government regulation.

Pricing strategies and features of their choice

1. Pricing strategy, which is based on the value of the product (the “cream skimming” strategy).

Companies using this strategy set high prices for products in a small market segment and skim the cream as they achieve high profitability on sales. The cost is not reduced to ensure that new consumers who enter this market segment reach a higher level. This strategy can be used if the product’s characteristics are truly superior to analogues or are unique.

2. Strategy for following demand.

This strategy has a lot in common with skimming. But in this case, enterprises do not maintain high prices all the time and do not convince consumers to reach a qualitatively new, more respectable level. Companies are gradually reducing the price, carefully controlling this process.

Sometimes firms make minor adjustments to a product's design, features, and capabilities to make it different from its predecessors. Often, companies, in order to accommodate lower product costs, promote product sales, change packaging, or prefer a different distribution method. At each new lower level, the price is maintained long enough to satisfy current demand in full. As soon as sales begin to decline, the company immediately thinks about the next price reduction.

3. Penetration strategy.

Pricing policy methods are very diverse. There is also a so-called price breakthrough - this is the establishment of a very low cost. Companies resort to this method to quickly get used to a new market and secure cost advantages from production volumes. If the company is small, such a strategy is unlikely to suit it, since it does not have the necessary production volumes, and the reaction from competitors in the retail trade can be very harsh and rapid.

4. Strategy to eliminate competition.

This strategy is similar to the previous one, but has different goals. Its main task is to block competitors from entering the market. The strategy is also used to increase sales to the highest possible level before a rival enters the market. In this regard, the price is set as close to the costs as possible. This brings in little income and is only justified in the case of large sales.

For a small company, this strategy helps to concentrate on a small market segment. Thanks to it, there are opportunities for quickly entering the market, making a profit in the shortest possible time and just as quickly leaving this segment.

5. Other strategies.

There are other pricing strategies, namely:

• maintaining a stable position in the market environment (when the company maintains a moderate percentage of return on equity. In the West, this figure is 8-10% for large-scale organizations);
• maintaining and ensuring liquidity - the solvency of the company (within the framework of this strategy, the enterprise must mainly choose reliable partners through whom it could consistently make a profit; here it is reasonable for the company to switch to payment methods that are convenient for customers, begin to provide benefits to the most valuable partners, etc. );
• expanding the company’s export capabilities (this strategy is associated with “skimming the cream” in new markets).

Pricing policy must be conducted in accordance with legal regulations and not contradict them. But there are other strategies that companies should avoid using. Some of them are prohibited at the state level, others contradict ethical standards accepted in the market. If an enterprise uses a prohibited strategy, it risks facing retaliatory actions from competitors or imposition of sanctions by government agencies.

Here are the prohibited pricing policy strategies:

• monopolistic price formation - a strategy associated with setting and maintaining monopolistically high prices. Companies resort to it to obtain excess profits or monopoly profits. There is a government ban on the use of this strategy;
• price dumping - in accordance with it, an enterprise deliberately lowers its prices relative to market prices in order to beat competitors. This strategy is associated with monopolism;
• pricing strategies based on agreements between economic entities that limit competition, including agreements aimed at:
• setting prices, discounts, surcharges, markups;
• increasing, decreasing or maintaining prices at auctions and trades;
• division of the market on a territorial or other basis, restriction of access to the market, refusal to enter into agreements with specific sellers or buyers;
• price formation strategies due to which the pricing procedure established by regulatory legal acts is violated;
• pricing and pricing policy for speculative purposes.

Any pricing strategy is a condition that determines how the product will be positioned in the market. At the same time, pricing policy in marketing is a function whose formation is influenced by certain factors. Among them:

1. Stages of the product life cycle.

This factor significantly influences both pricing and marketing strategy.

At the implementation stage, there are 4 types of pricing strategies.

During the growth stage, the level of competition usually increases. In this case, companies are trying to establish long-term cooperation with independent sales agents and are organizing their own sales channels. Their prices, as a rule, do not change. Companies strive to maintain rapid sales growth and, in pursuit of this goal, resort to improving and modernizing products, introducing improved products into untapped market segments, and intensifying advertising campaigns to encourage customers to buy them again.

At the maturity stage, the company reaches a stable level of sales and has regular customers.

At the saturation stage, sales volume finally stabilizes and repeated purchases support it. Here, businesses spend more time searching for untapped market segments, developing activities to win the loyalty of new audiences, and also thinking about whether and how regular customers can use the product in new ways.

To prevent a possible decline in sales, enterprises should take timely measures to prevent it - modify the product, work on quality, and improve characteristics. Sometimes it makes sense to reduce the price to make a product accessible to a wider consumer audience.

2. Newness of the product.

The price formation strategy is also influenced by what product the price is set for - a new one or one already existing on the market.

When deciding on a pricing strategy for a new product, an entrepreneur can act in three ways, namely:

Initially set the highest possible price for the product, focusing on wealthy buyers or those who first look at the quality and properties of the product and only then at the price. After the initial demand weakens and sales volumes decrease, the entrepreneur lowers the price, making the product available to a wider consumer audience. That is, in this case, the manufacturer is gradually covering profitable market segments. This pricing policy is called skim pricing.

Companies operating in accordance with it pursue short-term goals. It is reasonable to use this strategy if:

• demand for products is quite high;
• there is inelastic demand for the product;
• a company can effectively protect itself from competitors by obtaining a patent or continuously improving product quality;
• high cost in the eyes of buyers means good quality products.

First, the company sets a low price for the product in order to fill a certain niche in the market, avoid competition, increase sales and take a leadership position. If the likelihood of competition persists, the company can, by reducing costs, further reduce the cost of the product. Another option is the desire to become a leader in quality. In this case, the company can increase the costs of scientific and technical development and increase prices.

If there is no threat of competition, the company needs to increase or decrease the cost in accordance with demand. However, it should be borne in mind that a price increase is justified only when the company is one hundred percent confident in the recognition and demand of its product among the consumer environment.

The company operates in accordance with the strategy of “penetration pricing”, striving to achieve long-term goals. This pricing policy is suitable for a company if:

• the demand for its products is quite high;
• there is elastic demand for the product;
• low prices do not attract competitors;
• low prices in the eyes of consumers are not synonymous with low-quality products.

3. Combination of price and quality of goods.

Pricing policy is a function that determines the positioning of products in the market environment by choosing the optimal combination of price and quality.

• Product quality control, which cannot be neglected

Table 1. Types of strategies based on price and quality

Strategies show how quality affects price changes. In the same market, it is permissible to simultaneously use strategies 1, 5 and 9. For them to be successfully implemented, the corresponding categories of buyers must be present in the market.

Strategies 2, 4, 6, 8 are transitional options.

The purpose of strategies 2, 3 and 6 is to displace competitors from positions 1, 5 and 9; These are strategies for creating value advantages.

Strategies 4, 7 and 8 demonstrate how prices increase in relation to the consumer characteristics of the product. If competition in the market is high, the company's reputation may suffer from using this method.

4. Market structure and the company’s place in the market environment.

The determining factors of pricing policy here are leadership, market development, exit from it, etc. Generally speaking, monopolism in a market environment is not synonymous with uncontrolled price increases, since there is always the risk of competitors appearing with less costly production technology or analogue products . If such a situation arises, new competitors have the opportunity to firmly establish themselves in the market, occupy a significant part of it and get ahead of the segment leader who is improving its lagging technologies. That is, to be a pricing leader, market prices must be kept fairly high so that fund returns continue to attract new investment, but also kept low enough to avoid competition.

Markets intermediate between an oligopoly and a multi-supplier market can be controlled in part by mutual agreement.

5. Competitiveness of the product.

This pricing policy involves the company comparing its product with competitors' products and setting the price based on demand. We should not forget about the influence of other factors, including the reputation of the company, the types and methods of distribution of products used, which contribute to the formation of the competitiveness of the company and its products.

This strategy can be considered safe only if the company is the undisputed leader in its products. The company must also know what guides consumers from different segments in the domestic and foreign markets when making purchases. At the same time, it may be difficult to determine competitors’ prices due to their discounts and additional services, for example, free delivery and installation.

The strategies described above are not all the options that a company can use when setting prices. Each company has the right to develop its own pricing policy, based on many individual criteria.

Expert opinion

The only rational principle of pricing is profit orientation

Herman Simon,

CEO of Simon-Kucher & Partners Strategy & Marketing Consultants, pricing expert, Bonn

My experience is that the price that generates maximum revenue is significantly lower than the price that generates maximum profit.

If you have a linear demand curve and a linear cost function, the price that maximizes revenue will be half the maximum price. The price that maximizes profit is midway between the maximum price and the variable cost per unit.

Let me give you an example. The company sells machine tools at a maximum price per unit of goods of $150. The variable cost per unit is $60. Wherein:

• the price that maximizes revenue is $75 (150:2). Losses on the sale of goods at this cost amounted to $7.5 million;
• the price that maximizes profit is $105 (60 + (150 – 60) : 2). Profit amounted to $10.5 million.

To maximize profits, change the motivation system. Tie the seller's commission to the size of the discount: the smaller it is, the greater his bonus. Our company has organized such systems for enterprises operating in different industries. Discounts are reduced by several percent, but sales remain at the same level. Buyers stay with us. For a company to achieve better results, the sales rep's tablet or computer should be able to see changes in their commission amounts during value negotiations.

Expert opinion

4 Simple and Effective Ways to Manage Price

Yuri Steblovsky,

Customer Service Specialist, Runa Company

1. Cautious price increases. The main ones of this type are gradual changes and working so that buyers do not immediately notice them. It is necessary to increase the price not for all products in the assortment, but only for those products that customers do not use every day.
2. Price testing. On different days, they set different prices for the product, and then analyze which one customers responded to more.
3. Working with special offers. If a retail outlet primarily sells low-margin products, customers should be offered the highest-margin products as a companion product.
4. Customization. Involves individualization of sales. For example, if a store sells mugs, then it can offer the buyer to purchase a product with a print of their choice that costs twice as much as an analogue with the manufacturer’s design. Constantly conduct experiments and evaluate their results. Customization is an essential component in business development.

• How to sell a product at a higher price and earn more: 8 simple ways

Pricing policy factors influencing pricing

The company's choice of pricing policy is determined by a number of factors. Let's look at each of them.

• Value factor.

This is one of the most important indicators when choosing a pricing policy. Any product is more or less capable of satisfying customer requirements. To reconcile the cost and utility of a product, a company can give it more value - through promotional activities, show the buyer how good it is and set a price that is consistent with its real value.

• Cost factor.

The minimum cost of production consists of costs and profit. The easiest method of pricing is to add an acceptable rate of profit for known costs and expenses. But even if the price covers the costs, there is no guarantee that the product will be bought. In this regard, some manufacturing companies go bankrupt when the price of their products on the market becomes less than the production costs and expenses associated with its sale.

• Competition factor.

Pricing policy is very dependent on competition. A company can increase competition by choosing a high price, or eliminate it by setting a minimum price. If the creation of a product involves a complex production process or a special release method, then low cost will not attract competitors. But with high prices, rival companies will understand what to do.

• Sales promotion factor.

The price of products includes a trade margin, designed to recoup all measures aimed at stimulating sales. When a product enters the market, advertising must cross a threshold of perception before consumers become aware of the new product.

In the future, funds from the sale of goods should cover the costs aimed at stimulating sales.

• Distribution factor.

The cost of production largely depends on its distribution. The closer the product is to the buyer, the more expensive it is for the company to distribute it. If the product is delivered directly to the buyer, then each concluded transaction will turn into a separate operation. The manufacturer will receive the funds due to the supplier, but at the same time his production costs will increase.

This distribution method is good because it allows you to completely control sales and marketing. If a product is purchased by a large retail trade consumer or wholesaler, sales are no longer calculated in units, but in tens. In this case, control over the sale of goods and marketing is lost.

Distribution is the most important factor in marketing after the product itself. A product is not always able to fully satisfy the requirements of all consumers. Understanding this, manufacturers, depending on the price level, are more or less willing to make concessions in quality, weight, color, characteristics, etc. But, even if the seller, offering the lowest prices in his market segment, does not have the goods at the right time in in the right place, no promotional activities will help him.

Finding professional distributors who would be willing to sell goods is a rather expensive process. Intermediaries want to receive decent remuneration for storing products in warehouses and distributing them. The amount for these purposes must be included in the cost of goods. At the same time, the company must ensure that costs do not exceed similar costs of competitors.

• Public opinion factor.

The company's pricing policy largely depends on this driving force. As a rule, buyers have an established opinion about the cost of products. It doesn’t matter whether it is consumer or industrial.

When purchasing a product, people take into account certain price limits within which they are willing to buy it. The company must either not go beyond them, or let the buyer understand why the cost of the product does not fit within these limits.

The manufactured products may be better than their analogues in terms of their characteristics. If the audience perceives these advantages positively, then the price can be increased. If a product does not have obvious advantages, the company should conduct additional advertising campaigns or otherwise stimulate sales.

• Service factor.

There are pre-sales, sales and after-sales services. The costs of this must be included in the cost of the products offered. Such expenses, as a rule, include activities related to the preparation of quotes, carrying out calculations, installing equipment, delivering products to the point of sale, training and retraining of service personnel (salespeople, cashiers, customer interaction consultants), providing a guarantee or the right to purchase installment terms.

Many types of products do not require after-sales service. However, at the same time, a significant part of consumer goods (groceries, everyday goods) requires pre-sale service, for example, their placement in a display case, demonstration of characteristics. The costs of all these services must be included in the price of the goods.

• Customer service rules that increase sales in 3 stages

Development and formation of pricing policy: 7 stages

1. First, the enterprise determines what goal it should pursue. For example, this could be reaching a new level of sales or developing the business as a whole.
2. At the next stage, internal marketing research is carried out. The production capacity of the equipment, the cost of paying wages to personnel, the cost of raw materials and supplies, the cost of delivering products to points of sale and the search for new distribution channels, investments in marketing activities to promote sales, etc. are assessed.
3. Next, the company looks at what the pricing policy is, how flexible it is, how it is formed, what price range is set for similar products, and how changing market factors influence customer preferences.
4. At the fourth stage, the enterprise decides how it will set the retail price for goods. The main criterion when determining the approach to pricing is the highest possible profit from sales.
5. The fifth stage is the development of programs for adapting value to a changing market environment. The company analyzes what determines the level of demand among buyers and why the price has to be adjusted. This need may be determined by:

• increased costs for the production process and employee salaries;
• the need to increase production capacity and attract additional labor;
• the general state of the economy, prerequisites for the emergence of a crisis;
• quality of goods;
• a set of functional properties of the product;
• availability of similar products on the market;
• the prestige of the brand under which the products are sold;
• income of possible buyers;
• stages of the product life cycle;
• dynamics of demand development;
• type of market.

These parameters can be combined with each other and supplemented with other conditions. The main difficulty at this stage is that most of the indicators cannot be measured quantitatively.

6. The sixth stage is the final one, where the cost of the goods turns into monetary equivalent. The result of the pricing policy is always the price, the correctness of which is judged by the buyer. It is he who decides how optimally the consumer value of the product and its monetary expression are combined.

Before using one or another pricing policy, one cannot help but take into account the general retail price level in everyday dynamics. Such data can be provided by statistical directories, catalogs of various companies and other sources.

How to analyze pricing policy

Analysis of pricing policy involves studying the price level. Experts discuss whether the current price of a product can ensure profitability, how attractive it is in comparison with competitors’ prices, how elastic demand is in terms of price, what kind of pricing policy the government is pursuing, and also look at other parameters.

When a company sets unfavorable prices, it finds out what is causing it. The formation of unprofitable costs may be associated with the need to maintain sales at the same level while the quality of the product decreases, market capture policies, government pricing policies and other reasons. When a company evaluates how attractive the price of its products is to customers, it compares its prices with the average prices of its competitors for similar products in the industry.

If demand is elastic and the company sets itself the goal of capturing the market, then it can reduce the price. If it wants to maintain its market share, it can increase its value. If you plan to maximize profits, you should set the optimal price.

The basis for constructing a cost function can be the direct calculation method (selective), algebraic or mixed method. The basis for calculating the optimal cost and sales level is the condition of profit maximization, which is achieved if marginal costs and marginal revenue are equal.

The maximum profit is calculated as the derivative of the income function:

(C x D)’ = (a0 x D2 + a1 x D)’ = 2 a0 x D + a1

Marginal cost in economic terms is the cost of producing an additional unit of a good. Other things being equal, they are equal to variable costs per unit of output. The mathematical derivative of the cost function also equals the variable cost per unit:

C ‘ = (VCed x D + FC) ‘ = VCed

Let us imagine the equality of marginal revenue and marginal costs:

2 a0 x D + a1 = VCed

In this case, to calculate the optimal sales volume (Dopt), the following formula is used:

Dopt = (VCed – a1) / 2 a0

To calculate the optimal price (Tsopt) use the following formula:

Copt = a0 x Dopt + a1

Thanks to the results of the analysis of pricing policy, the company can determine how effective the current strategy is and, if necessary, make changes to it. Adjustments to pricing policies should be made based on the life cycle or type of product. For example, if an enterprise has recently begun to produce a product, its pricing policy should be aimed at capturing the market environment. If the product is at maturity, the price should be set to generate short-term profit. If a product is in a period of decline, the cost is formed so that the previous level of sales can be maintained.

The basis of a market economy is made up of financially independent commodity producers, for whom price is a decisive indicator of production and economic activity. If a company has chosen the right pricing strategy, correctly forms prices and uses economically proven pricing methods, then it will certainly achieve success and good financial performance in its work. Its form of ownership does not matter.

Mistakes that make pricing policy management ineffective

Pricing policy is one of the fundamental factors influencing the successful operation of a company. In this regard, prices should be set very carefully.

Often, marketers and business managers make a number of mistakes that lead to unsatisfactory economic performance. You need to constantly be in close cooperation with the production department in order to know about all the cost items that appear during the manufacture of goods without exception. If a company misses even the slightest detail, it risks reducing the efficiency of its work in the future.

Before launching products on sale, it is necessary to conduct detailed marketing research. Based on its results, you can judge how valuable the product is to the buyer. If the company considers that it is not necessary to carry out this event, then it may well set an unreasonably low cost and miss out on possible profits that would allow it to expand production.

You should also pay attention to the actions of competitors, in particular what pricing policy they follow. It is necessary to study several possible scenarios that determine how competitors will react to your events. If you underestimate your rivals, you may well lose your position in the market to them due to ineffective pricing policies.

Pricing policy of an enterprise using the example of well-known companies

• Coca-Cola.

The Coca-Cola Company's pricing policy is focused on seasonal demand. Since people consume soft drinks in greater quantities during the summer, the company negotiates the price from resellers. That is, if intermediaries set a markup that does not exceed 15%, the goods are sold on preferential terms. As a result, the final price for Coca-Cola products is formed. Such pricing and pricing policy have allowed The Coca-Cola Company to occupy a leadership position among domestic and foreign manufacturers for a very long time.

• Danone.

Today Danone is the undisputed leader in the dairy products market. This position allows it to set the highest possible prices, while offering the buyer a product of excellent quality. Such a pricing policy brings super-profits to the company - it “skims the cream” from the segment of buyers who have a special commitment to the brand. When a given category becomes saturated with products, Danone begins to gradually reduce prices in order to achieve loyalty among consumers of other groups.

• Aeroflot.

The company's pricing policy is that Aeroflot offers a variety of tariffs, presented in three directions: a simplified tariff schedule, rates for sale on the Internet and packages of new offers. Prices for air tickets in all three categories allow the company to earn a good income and take a leading position in the market in its industry.

Aeroflot's pricing policy is structured in such a way that each passenger can choose the optimal price conditions for themselves. The company takes into account the dynamics of pricing offers from competing companies and uses the obtained data in its work. It should also be noted that Aeroflot air transportation is available to many categories of buyers, since the company provides preferential rates and various kinds of discounts.

• Apple.

The company managed to build such a pricing policy that the price for one unit of goods cannot be lower than $1,000, and with the release of each new product model, brand followers immediately want to purchase it. Expert estimates suggest that the enterprise value will very soon be equal to one trillion dollars, which will make Apple the most valuable brand in history.

Even at the very start, Apple's pricing policy was strict. The company was guided by the fact that the majority of the consumer audience perceives “expensive” as “quality” and does not attach much importance to overpayment.

Apple does not use a discount system. The only exception is when students can purchase brand products a little cheaper, but even here the buyer's savings do not exceed $100.

Both sales offices and resellers adhere to this pricing policy. The only way to buy new Apple products at a discount is on the Internet, for example, on eBay.

• Samsung.

Samsung's pricing policy is based on two main principles. Firstly, the enterprise focuses on a brand that occupies a leadership position. Secondly, it uses methods of psychological influence on the consumer. The price of one unit of goods is never expressed as a whole number, for example, 4990 rubles.

Samsung products are designed for consumers with average incomes and above. Despite the low cost, the brand's products are of very high quality. A small component of the price is for warranty service. Its presence increases the loyalty of consumers aimed at purchasing equipment and comparing offers from different manufacturers.

Information about the experts

Igor Lipsits, Professor of the Department of Marketing, State University - Higher School of Economics, Moscow. Igor Lipsits - Doctor of Economics, Professor. Author of 20 monographs and textbooks. Consults foreign and Russian companies (including RAO UES of Russia, AFK Sistema) on marketing and business planning.

Herman Simon, CEO of Simon-Kucher & Partners Strategy & Marketing Consultants, pricing expert, Bonn. Herman Simon is director of Simon-Kucher & Partners Strategy & Marketing Consultants (New York). The company has 33 offices in 23 countries. Pricing expert. He is one of the five recognized experts in the field of management along with Peter Drucker, Fredmund Malik, Michael Porter and Philip Kotler. In the fall of 2016, his book “Confessions of a Pricing Master” was published in Russia. How price affects profit, revenue, market share, sales volume and company survival” (M.: Byblos, 2017. - 199 pp.).

Price as an economic category, being the most important component of the economic mechanism, it performs accounting, stimulating and distribution functions. In one case, it reflects the socially necessary labor costs for the production and sale of products, in the other, it is used to develop resource conservation, increase production efficiency, and improve product quality on the basis of scientific and technological progress. In the third case, the price contributes to the implementation of government goals through the inclusion of excise tax, value added tax and other forms of income going to the budget of the state, region, city.

To solve production and economic problems, the company develops pricing policy, which is entrusted with achieving such goals as increasing the profitability of its own assets, increasing sales and net profit, and expanding the market.

To achieve the set goals, the pricing policy must be developed in accordance with the marketing strategy of the enterprise. The objectives of such a policy, for example, could be:

• expansion of the market for products manufactured by the enterprise;
• penetration into new markets;
• product market segmentation;
• development of new types of products or modification of existing ones to conquer new markets.

As practice shows, an enterprise can realize its marketing intentions using an active price management mechanism. For these purposes, you can use one of the specific pricing techniques, for example, premium pricing or a “skimming strategy”, a price breakthrough strategy (lower prices).

The development of pricing policy and strategy of the enterprise is carried out in three stages. At the first stage, initial information is collected, then a strategic analysis is performed, and the third stage is directly devoted to the formation of a pricing strategy.

The practice of price formation distinguishes two main models: market pricing and centralized pricing. In the USSR, under command-administrative management of the economy, price establishment took place in the sphere of production. Prices were determined depending on the costs of producing products and providing services. In market conditions, the situation has changed. Now prices are formed in the sphere of product sales under the influence of supply and demand, the buyer’s assessment of the usefulness and feasibility of its purchase, quality and competitiveness. In this case, the role of the state is reduced to determining general approaches to pricing and establishing regulated prices (tariffs) for a limited range of goods and services. For example, the state reserved the right (and obligation) to regulate prices for socially important goods. In this way, the poor are protected.

The reliability of the calculation of market capacity, and, consequently, the sales volume and production volume depends on a correctly developed pricing policy. This is due to the fact that with an increase in production volume, the share of semi-fixed costs per unit of product decreases, which leads to a reduction in the cost per unit of production, and vice versa. If in this case a costly pricing method is used, it may lead to errors in financial calculations. The pricing method must correspond to market conditions for the sale of goods and ensure the financial stability of the enterprise.

Economic theory and practice make it possible to use different types of prices, which can be classified according to the degree of regulation, by the sphere of commodity circulation, by the nature of trade relations and by territorial basis. Price formation is based on the reimbursement of production and circulation costs, ensuring a certain share of profit, which gives the enterprise the opportunity to reproduce them and make contributions to the budget. Production costs are the most important element of the chain structure. Therefore, if for a certain period of time the price of sold products is taken as a constant value, then an increase in profit is possible only by reducing its cost. Consequently, the profit of a manufacturer, wholesaler, sales organization or retail trade enterprise will be higher, the lower the distribution costs. This creates incentives to reduce production costs.

The principles of pricing for products, works and services in conditions of free pricing include:

• presence of a competitive market;
• making transactions between non-interdependent persons or interdependent persons, if this circumstance does not affect the results of such transactions;
• availability of information on the terms of transactions with identical or similar products: quantity (volume) of supply, deadlines for fulfilling obligations, payment terms, other reasonable conditions that may affect prices;
• availability of sources of information on prices, tariffs for goods, works or services and stock quotes.

For competent pricing, it is necessary to clearly understand the essence of the definitions and concepts of free pricing. Let's get acquainted with the most important of them.

Market price products, works or services is recognized as the value formed as a result of supply and demand on the market for identical or homogeneous products, works or services under comparable economic conditions. Product market, works or services is the sphere of their circulation, determined on the basis of the possibility of actually purchasing or selling products, work or services without significant additional costs.

Recognized as identical such types of products that have the same basic characteristics characteristic of them: physical characteristics, quality and reputation in the market, country of origin and manufacturer.

Homogeneous are those types of products that have similar characteristics, in particular: quality, trademark, reputation in the market, country of origin, and consist of similar components, which allows them to perform the same functions, and therefore they can be commercially interchangeable.

The market price is determined taking into account premiums or discounts to the price. In particular, discounts caused by:

• seasonal and other fluctuations in consumer demand;
• loss of quality or other consumer properties of goods;
• expiration of the shelf life or sale of goods;
• marketing policy;
• implementation of samples and experimental models.

In market conditions, pricing is influenced by various types of markets. A distinction should be made between markets in which prices are determined by the market itself, controlled by sellers, set by monopoly structures, or controlled by the state. This leads to the presence of price and non-price competition. Chain competition involves selling goods at lower prices than competitors. Non-price competition is based on the principle of value. With such competition, what is important for buyers of a product is not the price as such, but the utility of the product. For example, in conditions of free competition, the price of products does not undergo significant changes from an increase in the volume of products produced. It is formed under the influence of existing supply and demand in the commodity market.

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conclusions

• 1. The chain is a monetary expression of the value of the goods, which reflects the result of the production and economic activities of the enterprise.
• 2. The system of interrelated and complementary prices provides for the existence of various types of prices. For example, according to the degree of regulation, free, regulated, fixed and monopoly prices are distinguished; but in the sphere of commodity circulation - wholesale industrial prices, retail prices, tariffs for paid services and freight and transport transportation, prices for construction products and works, prices serving foreign trade turnover, purchase prices for agricultural products and products of various crafts. According to the nature of trade relations, prices are divided into auction, exchange, contract and foreign trade, and according to territorial basis - into single and regional.
• 3. The pricing policy of the enterprise pursues long-term and short-term goals. To form it, methods are used based on the study of patterns of supply and demand, assessment of production costs and analysis of prices for competitors' goods.
• 4. The pricing strategy of an enterprise can be passive or active in nature, which implies compliance with one of the types of pricing strategy: “skimming cream”, penetration (introduction) into the market, “following the leader”, neutral pricing strategy, establishing a prestigious price, sliding price, flexible price, preferential price, prices for products already discontinued, etc.
• 5. Pricing methods are based on such criteria as ensuring a minimum price level determined by all types of costs; maximum price level formed by demand; optimal price level formed on the basis of a product promotion system.
• 6. Prices may be modified depending on the quality of the products produced, the type of product, its assortment, delivery conditions, intensity of demand, seasonality and geographical factors. Price modification is achieved by using a system of discounts and surcharges, price discrimination and stepwise price reductions.
• 7. The pricing policy of an enterprise is formed under the influence of the economic situation on the basis of free competition, monopolistic competition, oligopoly or pure monopoly.

Pricing and pricing policy

Pricing is the process of setting prices for goods and services. There are two main pricing systems: market and centralized state. Market pricing operates on the basis of the interaction of supply and demand; government pricing is the formation of prices by government agencies. In market conditions, pricing is a complex process influenced by many factors. In each case, the marketing service will have to choose the pricing policy of the enterprise.

The pricing policy of an enterprise is to set appropriate prices for goods and services and thus adjust them depending on the market situation by interrelating the prices of goods within the range, using special discounts and price changes, the ratio of the enterprise’s prices and the prices of competitors, methods of formation prices for new goods in order to capture its maximum possible share, achieve the planned amount of profit and successfully solve all strategic and tactical tasks.

When developing pricing policies, marketers should get answers to the following questions: what is the market model; what place does the price take among competitors in the market segments where the enterprise operates; what price calculation method should be adopted; what should be the pricing policy for new products; how the price should change depending on the life cycle of the product; what are the costs? Pricing policy has a long-term impact on the activities of the enterprise. Therefore, before developing it, it is necessary to analyze all external (independent of the enterprise) and internal (depending on the enterprise) factors influencing the development of a pricing strategy.

The main external environmental factors influencing the price level are: government policy; political stability in the country, as well as in the countries where the company’s products are sold; resource provision; state regulation of the economy; perfection of tax legislation; general inflation rate; nature of demand; presence and level of competition, etc.

The main factors of the internal environment of an enterprise that influence pricing include: product properties; quality and value of products for the buyer; the specifics of the products produced (the higher the degree of processing and the more unique the quality, the higher the price); method of production, procurement of raw materials and supplies (products of small-scale and individual production have a higher cost, mass-produced goods have relatively low costs and not so high a price); mobility of the production process; targeting market segments; product life cycle; duration of the product distribution cycle from producer to consumer; differences between market segments or customer demand factors; competitors' reactions; service organization; image of the enterprise in the domestic and foreign markets; product promotion activities, marketing goals.

The pricing strategy is linked to the overall goals of the enterprise in the market. Such goals may be: increasing sales of goods; obtaining a given or maximum amount of profit; ensuring survival (winning a larger market share); gaining market leadership; maintaining the existing economic situation in the fight against competitors; formation of a certain image of a product, etc. An enterprise chooses each of its goals based on certain reasons or its financial situation.

The pricing policy of an enterprise can be formed on the basis of costs, demand and competition. When forming a cost-based pricing policy, prices are determined based on production costs, service costs, overhead costs and estimated profits. When forming a pricing policy based on demand, the price is determined after studying customer demand and setting prices acceptable for the target market. When forming a pricing policy based on competition, prices can be at market levels, below or above them. All three approaches require a comprehensive solution to a number of problems determined by the choice of one or another pricing policy.

When forming a pricing policy, a marketer should answer the following basic questions: what price would the buyer be willing to pay for the company’s product; How does a change in price affect sales volume? what are the constituent cost components; what is the nature of competition in the segment; what is the minimum price level that ensures a break-even price for the enterprise; will delivery of goods to the buyer affect the increase in sales volume; what discount can be provided to customers, etc.

Before forming a pricing policy, it is necessary to determine the model of the market into which the enterprise intends to enter. There are several market models: pure competition market, pure monopoly market, monopolistic competition market, oligopolistic competition.

Characteristic features of the pure competition market model are the many sellers and buyers of any similar product. No buyer or seller has a significant influence on the level of market prices. There are usually no obstacles to entering such a market. The costs of developing a price policy are minimal, since the price level is determined by the relationship between supply and demand.

Pure monopoly market model. In this case, one enterprise is the only producer and seller, there is price control, and entry into such a market may be blocked. With this model, no special pricing mechanism is required.

Monopolistic competition market model. With this market model, there is a relatively large number of sellers and buyers, easy conditions for entering the market, and some control over prices within very narrow limits. Such a market requires marketing research and the development of a specific pricing policy. In oligopolistic competition, a small number of enterprises enter the market and dominate the market. They prefer to negotiate prices, setting a convenient trading margin and dividing the market into zones of influence. This model requires a careful pricing mechanism.

The main stages of the pricing process are: setting pricing objectives; determining the level of demand; determination of costs; analysis of prices for competitors' products; selection of pricing methods; setting the final price. Pricing objectives are determined by the overall goals of the enterprise. The main objectives of pricing can be: survival in the market (ensuring sales); profit maximization; maximizing market share; gaining leadership in product quality; orientation to the existing market situation.

If an enterprise operates in a highly competitive environment, when there are many manufacturers with similar products on the market, the main task is to ensure sales (survival). When choosing a pricing policy, marketers must study the pricing policies and prices of their competitors, and the quality of their products. If a company's product is of lower quality than its competitor's, it cannot charge the same price as a competitor. Reduced prices, market penetration prices are usually used in cases where the price demand of buyers is flexible and elastic; if the enterprise wants to achieve maximum growth in sales volume and increase the total profit by slightly reducing the profit from each unit of goods; if the enterprise assumes that an increase in sales volume will reduce the relative costs of production and sales; if low prices reduce the level of competition; if there is a large consumption market, as well as when trying to capture a large market share.

The main objectives of an enterprise to maximize profits can be: establishing a stable income corresponding to the average profit for several years; calculation of price growth, and, consequently, profit due to the increase in the cost of capital investments; the desire to quickly obtain an initial profit if the enterprise is not confident in the favorable development of the business or lacks funds. When focusing on maximizing profits, the company must choose the appropriate price (high level). Typically, in such cases, current performance is more important than long-term performance.

When fulfilling the task of maximizing market share, the enterprise must ensure an increase in sales volumes. This goal is set on the assumption that a large market share will have low costs and high long-term profit margins in the future. Here you need to know for what period of time you need to reduce prices and to what level.

When solving the problem of achieving market leadership in product quality, it is necessary to give the goods new properties, increase their durability, reliability, etc. To do this, it is necessary to carry out research and development work, which usually leads to high costs and high prices. Improving the quality of products allows you to outperform competitors, but in this case, high prices should be considered by buyers as quite acceptable.

If the goal of pricing is to focus on the existing market position, unfavorable moves by competitors should be avoided. So, if competitors have reduced the price in order to gain a larger market share, then the enterprise must also reduce it to the limits possible for itself. The opposite situation may also occur, when the price level increases.

The next step in the pricing process is to determine the level of demand. To determine how sensitive demand is to changes in price, a demand curve should be drawn for each product, which allows one to establish the relationship between price, demand and supply and characterize the elasticity of demand. There is an inversely proportional relationship between price and demand, when an increase in price decreases demand or, conversely, a decrease in price leads to an increase in demand. This dependence is called elastic, flexible. But it may also happen that an increase in price will lead to an increase in demand. Typically, this situation occurs when buyers believe that high prices correspond to higher quality goods. At this stage, the main task of the marketer is to establish the relationship between price and demand (elastic or inelastic); setting a limit for increasing or decreasing the price at which demand increases; determining the quantitative relationship between price and demand and calculating the elasticity coefficient. Based on this stage, the maximum price of the product is determined.

Costs have a significant impact on the pricing policy of an enterprise. At the cost estimation stage, the minimum price that can be set for the product should be determined. The minimum price for a product is determined by the costs of production of the product, its distribution and sales channels, including the rate of profit. Costs can be fixed, variable or gross. Fixed costs are expenses that remain unchanged (salaries, rent, heat supply, interest payments, etc.). They are always present, regardless of the form of the enterprise and the level of production.

Variable costs change in direct proportion to the level of production. For example, when manufacturing mobile phones, an enterprise incurs costs for the purchase of special equipment, plastics, conductors, packaging, etc. Per unit of production, these costs usually remain unchanged. They are called variables because their total amount varies depending on the number of units of products. Gross costs are the sum of fixed and variable costs at each specific level of production. The company strives to receive an amount for the product that would at least cover all gross production costs.

Marginal cost is the incremental or incremental cost associated with producing each additional unit of output over a given level of output. Marginal costs make it possible to determine the unit of production on which the company should focus its attention: change the unit price of the product, reduce or increase production.

If costs are reduced, the company can reduce its price or increase its profit share. If costs increase, it is possible to shift their increase to the buyer by increasing prices, provided that there is demand for the product, or modify the product in order to reduce their costs and maintain the price level, or increase them, or remove the product from production as unprofitable. The price must cover the costs, otherwise there is no point in producing the product. This requires the establishment and analysis of factors affecting production costs and the cost of certain types of products.

When choosing distribution channels, in order to successfully cooperate with participants in distribution channels, you should take into account the need to cover costs and make a profit both at your own enterprise and with the intermediary: provide price guarantees, especially when introducing a new product to the market, provide sales promotion measures.

The next steps in the pricing process are to analyze the prices of competitors' products and select a pricing method. The prices set by competitors largely determine the pricing strategy of the enterprise, so they should be carefully analyzed. As a rule, buyers prefer a product whose price corresponds to the level of quality. To analyze competitors' prices, you can use both expert assessments of enterprise specialists and a survey of customers themselves. By comparing the quality indicators and prices of competitors with similar indicators of their own enterprise, marketers must draw certain conclusions about the price level.

Price adjustment occurs through changes in price lists, the use of markups, allowances, discounts, and compensations. Implementation of pricing policy, development of pricing strategy, and their practical implementation require highly qualified employees of marketing services, responsibility for decisions made and a creative approach.