Page 210 - GLOBAL STRATEGIC MARKETING

accordingly. Problems can include consumer demand and perceptions of
the product and its position in relation to other competitor offerings;

economic unrest; new competitors entering the market with a superior
quality product or counterfeiting and parallel importing. Parallel importing
prices ‘real’ products and brands at a cheaper level than the company and

can arise due to distributor deals with unofficial channels of distribution.
Therefore, price management is critical to a successful pricing strategy.

The different types of pricing a company can adopt are highlighted in the
following section.

9.3 Types of pricing strategy

• Set low prices that result in low margins: The firm expects that
elasticity of demand will result in increased volume, so the overall

contribution from the product will be sufficient to meet profit and
contribution targets for that product or product line. This is possible if

the firm is already installed with a large base and enjoys scale
economies.

• Follow the price leader: When there are strong competitors in the
market they usually set the prices, and the company will try to match

them.

• Cater for a niche market: The company will cater for niche segments
where a higher price is acceptable, in return for features and product
characteristics needed and desired by customers.

• Price on a cost-plus basis: Overall cost and desired profit margins
determine the level of prices. In the long-term, prices should cover
costs to yield a reasonable return on investment.

According to Woods (2001), when the price strategy has been set,
various other factors must be considered:

• Company objectives

• The legal and regulatory environment of the intended market