Price Strategy

Abstract

The business strategy defines the framework for price management. This starts with articulating the set of goals the business is pursuing. In general, these goals have many dimensions and are often to some extent contradictory, so that it is necessary to prioritize the goals when setting prices. The price strategy of a company has an enormous influence on shareholder value. The right strategies contribute to sustained growth of the value of the enterprise. Pursuing the wrong strategies can quickly destroy enterprise value, in some cases permanently. The most fundamental decisions concern price positioning. We distinguish among five typical price positions: luxury, premium, medium, low, and ultra-low. We will explore each of these positions, looking in particular at their respective bases, the associated marketing instruments, and the opportunities and risks. Markets are dynamic, which means that a price position should change in line with changes in market conditions. Yet the process of making such changes can take a long time to unfold, and the results are not easy to correct.