The Variations of Optimal Pricing Strategies

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When these things are well considered, an appropriate pricing strategy can be developed in order to optimize profits for a company.
According to Kyle (2010), there are seven strategies that will create the best possible profit potential for a company. Competitive pricing, cost-plus markup, loss leader, closeout, membership or trade discount, bundling or quantity discount, and versioning all are very different pricing strategies with the potential to create greater profits. Competitive pricing is determined by looking at the prices that competitors are using and then pricing one’s own product a the same or lower price. One way a company can use this to their advantage is to force their suppliers of materials into bidding on business in order to drive down the costs of creating a product. An example of this can be found through GM who does not contract with its suppliers, but rather allows them to place bids and compete with one another for their business (Hill, 2009, p. 300). For Gm, this is done on a yearly basis always forcing the lowest priced supplies.
improvements are not the first concern as there is no guarantee that putting themselves in a position to provide a better product will not necessarily provide a pay-off. According to Porter (1998) value is determined by the price that consumers are willing to pay in comparison to the costs to a company to produce a product (p. xvi). The problem with competitive pricing is that while a firm might undercut the prices of another firm, the price of those costs might be absorbed by lowered quality. Therefore, cost-plus markup might be a more feasible type of pricing.
Cost plus mark-up entails the assessment of the costs of creating a product plus a markup that provides a suitable profit in order to come to a market price.