Pricing and Concept Methods with a Focus on Tobacco Companies
Price is the value got for the exchange of business transactions. This is achieved by an exchange of a product or service from a producer or seller for a monetary value that customer offers. Markets have never presented to companies a stable market in terms of prices in favor of the business entities (Smith, 2011). The differences market and different market controls present have both positive and negative impacts to the growth of these businesses. Pricing methods are defined as the use of information on prices to represent the evolution of price index compilation. Thus, the method used defines the price that the product will be sold to a consumer (Diewert, Greenlees, & Hulten, 2009). In selling its products to consumers, the company considers the manufacturing costs, market position, market conditions, brand, and the quality of the as important factors to the product they sell. An in depth look at the tobacco industry is to provide a better understanding of the result of the pricing and concept techniques that affects different businesses. Therefore, this paper looks into the pricing and concept methods in the tobacco industry.
Elasticity is defined as the ability of the product in the market to change according to the results of the market forces that a product is exposed. The increase in the prices affects the need of the product in a market (Diewert, Greenlees, & Hulten, 2009). Tobacco industry faces many challenges compared to other businesses in its operation, in the business. Even in the case of an increase of tits prices due to legislative changes enforced by the government, the need for tobacco never declines. In a normal situation, a slight increase of prices of a product results in a decrease of the demand in any market. The inelasticity of tobacco makes it a different product in the market segments. Health wise, tobacco is considered harmful to the users, but a large segment of the customers still cannot survive without it. The different changes that the state and legal systems have imposed on the different market products have also led to the different adaptations for the production in the different industries. Better brands have been made, to attract more customers and wider market compared to the time before the changed were implemented (Smith, 2011). Considering the target market, a cost pricing strategy is developed to help identify a specific product that the target market needs for a given satisfaction. Since the inception of the tobacco industry, different inventions have been instituted to create a bigger, wider market for the products. Demand based pricing that assumes the elasticity of the product in the market has enabled the continued existence of the tobacco industry (Smith, 2011). Since it is never affected by the changes in the prices with about the customers demands, tobacco industry has continued to gain more market and customers. Competition based pricing is also a sector that the tobacco industry is dependent on though, the tobacco industry has fewer competitor industries.
The tobacco industry is less affected by the pricing changes that the government and legal systems pose to the market. With considerations of the different pricing strategies, tobacco industry has continued to gain a vast market. The ever changing brands cost pricing, demand based pricing, competition based pricing have enabled continued existence and market the tobacco industry enjoys compared to other companies.
Diewert, W., Greenlees, J., & Hulten, C. (2009). Durables and. London: The University of Chicago Press.
Smith, T. (2011). Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures. Ohio: Cengage Learning.
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