1. Author: Jesús Ferradás González
Theme: Profesor de Esic
Article Title: El Pricing as a tactical and strategic variable of competition
Marketing is the art or science of satisfying the needs of customers and making a profit at the
same time (Philip Kotler).
Marketing aims to design the product, establish prices, choose distribution channels and the
most appropriate communication techniques, thereby seeking a balance and optimisation of
all variables (marketing mix) so that they reach their common destination: The Customer.
These 4 operational marketing tools are those that use the company to implement marketing
strategies and achieve the set objectives. They are known in the professional world as the Four
P's of Professor Jerry McCarthy.
Of the 4 variables, only one of them is reflected directly in the operating account, the price.
Training illustrates the setting of prices with different pricing policies that generically show
alternative ways of price fixing in products and services.
Traditionally, we have studied the feasibility of the price based on supply and demand (elastic,
inelastic, unitary) but today, the price is determined by the competitiveness of the country,
technology, design, branding, commercial aggression, HR competition, the marketing that the
company develops on the market, by the positioning of the company and the product, and the
commercial skills with which we operate in the market.
In principle, if there are no differential values of competition as perceived quality, competitive
position, brand, design, the sales network, collateral service and valued communication, we
can not charge more than others or exceed the psychological price that each product has as a
reference.
When setting prices, we should lay down an objective to acheive. Its circumstances may be
conditioned by values and strategic position, value and brand positioning, product positioning,
return on equity, return on sales, target market penetration, profit maximisation, attack or
defense of a competitor, entry barrier into new markets. We should also eliminate
unproductive references, achieve break even, increase customer lists, expand into new
markets, the perceived value facing the customer, its use as a promotional tool ...
We add tactical considerations to these variables such as promotional prices, price guarantee,
price of prestige, psychological prices, flexible prices ... as a current demand for change in the
variable price. In addition to the consideration of the variables we have referred to, we have,
as a roadmap for fixing the price based on costs, competition based on sales and margin based
on the estimated demand, as traditional policies when it comes to designing Commercial Policy
in order to achieve and maximise short, medium and long term benefits.
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2. Therefore, it is not a simple equation to manage and for its correct application we need
training and experience when using price as a tactical and strategic competitive tool.
Depending on the type of products we are dealing with, the services, industrial goods and
consumer products with high turnover, we need to incorporate the nuances of the sector and
those of the competitive environment in which we are situated.
The biggest mistake is to apply a generic cost policy and fall into the trap that "The biggest
form of inequality comes from treating different things equally." Each product category must
have its own price range, tactics and differential price strategies, towards the client and
towards the competition.
My experience as a business consultant allows me to say that this is one of the key variables of
marketing which is not devoted a sufficient amount of intensity and business intelligence,
being relatively easy to improve company margins and competitiveness. These variables are
critical for the survival of many companies in today’s crisis.
Jesús Ferradás González
Professor at Esic
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