Choosing the Wrong Pricing Strategy

Choosing the Wrong Pricing schema Can Be a Costly Mistake: intimacy@Wharton (http://knowledge.wharton.upenn.edu/article.cfm?articleid=792) Choosing the Wrong Pricing Strategy Can Be a Costly Mistake Published : June 04, 2003 in Knowledge@Wharton Prices have been at the center of human fundamental interaction ever since traders in ancient Mesopotamia -- our modern-day Iraq -- began keeping records. Who doesnt love to guess what something costs or argue to the highest degree what something ought to cost? So it should come as no rage that companies spend a lot of time figuring let on how to price their products and services. But two professors in Whartons merchandise department, Jagmohan S. Raju and Z. John Zhang, say firms do not always go about pricing the right way. Raju and Zhang say devising attach pricing strategies is more critical than ever in a world of hyper-competition. Pricing strategies also take on added brilliance at a time when central bankers and economists are touch about the possibility of deflation a broad, general decline in prices. This is a single/personal use copy of Knowledge@Wharton. For multiple copies, custom reprints, e-prints, posters or plaques, please contact PARS world(prenominal): reprints@parsintl.com P. (212) 221-9595 x407.

According to Raju and Zhang, research suggests that pricing strategies can have a huge influence on company profits. They cite a study of more than 2,400 companies by McKinsey in 1992 showing the jar that various decisions would have on the bottom line: a 1% reduction in fixed costs improves profitability by 2.3%; a 1% increase in heap will result in a 3.3% increase in profit; a 1% reduction in inconsistent costs will prompt a 7.8% rise in profit; but a 1% hike in pricing can boost profitability by 11%. In recent years, business people have paid attention to many things that can influence their companies success, Zhang says. Theyve looked at organisational behavior, downsizing, benchmarking and... If you want to get a full essay, order it on our website: Ordercustompaper.com

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