The man who will use his skill and constructive imagination to see how much he can give for a

dollar, instead of how little he can give for a dollar, is bound to succeed. ~ Henry Ford

Alhamdulillah, in the willing of Allah the most mighty and grateful creator, to give us an

opportunity to complete my first assignment of this semester which not only a set of skill and knowledge

but a huge marketing thinking about the ways to pricing the product that our company have pointed out.

At this point we also want to gratitude thousands of gratitude towards my helping teacher, En.

Mohammad Hamizul Hazrin Bin Hasani that has sacrificed a lot to us in order to overcome our problems

in order to finish our assignment. Again, thank you so much sir.

Move on, we also want to give my appreciation to my caring and kind family who always give us

a pushing hand to support and help me in order to settle up this assignment by financing aid and others.

And not to forget to our dearest friends and classmates who always stand next to us in giving us

motivations in order to ensure that I could complete this assignment. All the lending hands given by our

dearest friends and classmates can only be paid by The Almighty.

Lastly, we would love to give our appreciation to those who involved in completing this no matter

directly involved or indirectly involved, we would like to say thank you for all of your kindness, lending

time to assist us which make us feel so touched. Thank you again to all.

ACKNOLEDGEMENT

On the 9 April 2013, all students of Principle of Marketing (FIB 1B) have to deliver the third

assignment based on research. This assignment is related to the achievement, potential and suggestion

of the products that provide by the company that we investigate. This assignment consists of three main

questions that targeting on the price of the product of each company.

The first question required the student to build up a company by dividing the class into three

groups. This question ask us to state the company name and the products or services that provided by

the company and do some research on the products that have been pointed out. This question also

encourages us to explain the background of our company and the establishment of our company from

the beginning.

The second question required us to explain the type of policies that have been used by our

company in order to set up the price of the products that have been pointed out. These policies are

needed to determine the suitable ways to set up the price of the products.

The third question is asking me to explain about the factors that affect the pricing. There are

many factors that affect the pricing. These factors usually depend on the environment of the production

and the certain expenses for the production of the products.

The forth question is required the student to perform the pricing strategies. By regarding on

proposing relevant segmentation criteria to be used for this company, this question requested to

identification and analysis of our company strategies in order to put the products in higher level of the

marketing structure in our country.

Last but not least, the question is asking about the conclusion that could be made by us after

doing this research and simply summarized all the data that we get in order to gain the profits from the

selling of these products.

This assignment will be submitted on 16th April 13.

INTRODUCTION

TABLE OF CONTENT

I hereby confirmed that this assignment is my own work and not copied or plagiarized from any source. I

have referenced the sources from which information is obtained by me for this assignment / project

Signature : ___________________________

Matrix no. : ___________________________

Name : ___________________________

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DECLARATION

Pricing policies is the marketing strategies that used by the administration of the company such

as manager in order to set up the price of the product. Manager should start setting prices during the

development stage as part of strategic pricing to avoid launching products or services that cannot sustain

profitable prices in the market. This approach of pricing enables companies to either fit costs to prices or

scrap products or services that cannot be generated cost-effectively.

Through systematic pricing policies and strategies, companies can reap greater profits and

increase or defend their cost of the production. Generally, pricing policy refers how a company sets the

prices of its products and services based on costs, value, demand, and competition. Pricing strategy, on

the other hand, refers to how a company uses pricing to achieve its strategic goals, such as offering

lower prices to increase sales volume or higher prices to decrease backlog. Despite some degree of

difference, pricing policy and strategy tend to overlap, and the different policies and strategies are not

necessarily mutually exclusive.

After establishing the bases for their prices, administration of the company can begin developing

pricing strategies by determining company pricing goals, such as increasing short-term and long-term

profits, stabilizing prices, increasing cash flow, and warding off competition. Administration of the

company also must take into account current market conditions when developing pricing strategies to

ensure that the prices they choose fit market conditions. In addition, effective pricing strategy involves

considering customers, costs, competition, and different division of market.

There are three ways where the policies can be established which are cost-oriented, demand-

oriented and competitor-oriented. These three ways is depending on the types of product or service that

the company wants to point out the product or service to the public.

PRICING POLICIES

1.0 The Nerves’ Page in Facebook

1.1 our company’s products

COMPANY BACKGROUND

On April 2010, three friends, which are Sofwan, Hasanah and Dalilah who shared the same

interest of publishing our creativity and ideas was incorporated as Butang Baju Co. Somehow, on 1

December 2010, we made some changed on our company named, which is TheNerves Co. With the 11

machinery equipment and printing machines, and also 30 skill workers work in our company, the

production of products increase 50% every year. We also get the trust from the government and non-

government organization to produce their products like t-shirt, corporate attire and souvenirs for a certain

events. From this step, we develop our company to the international stage.

Although we achieved the higher level in the company performance, we also had faced the big

loss during run the business because of the carelessness in management in the company. The

administration had to be stopped and there is a dispute between members of the top

company committee. But, we managed to rectify the situation after a few meeting had been made.

Our company stop operated for about 3 months to recover our loss and renew our company

account. From that moment, we try the new venture by introducing the new service which is motivational

service. We used our experienced to conduct the seminar on the topic of “Wake up from the Failure”. Our

new service got much attention from the public. We managed to rise up our profit from the new service.

We also started to take the order of the card publishing for any type of event or for the personal use.

Based on the latest technology and modern printing, The Nerves Co. always faced present and

future challenges with spirit and high confident level. It is the hope and goal of the company is to

continue to provide and make printing services that are efficient, fast and high quality printing in addition

to improving the quality of work in the operating environment for more creative and productive.

The Nerves Pricing Policies

Our management of The Nerves Company uses two types of policies which is cost-oriented and

competitor-oriented.

Cost-oriented

This policy can be summarized by the formula :

Cost + Fixed profit percentage = Selling price

Cost-based pricing involves the determination of all fixed and variable costs associated with a

product or service. After the total costs attributable to the product or service have been determined,

managers add a desired profit margin to each unit such as a 5 or 10 percent markup. The goal of the

cost-oriented approach is to cover all costs incurred in producing or delivering products or services and to

achieve a targeted level of profit. As The Nerves company sells various types of shirts and souvenirs that

we designed for the customers. Usually, customers ordered our products by large quantity because they

want the uniform clothes or souvenirs for any event or organization.

The company always determines the cost of production and the profit that they may get before

set up the pricing of the products. The Nerves set the reasonable price for each product that produce.

For example, we sell the basic t-shirt for one color at RM 26 each which after we have calculated the

expense that we have to bear is RM 17. So, the profit that we might get is RM 9 for each t-shirt.

By itself, this method is simple and straightforward, requiring only that managers study financial

and accounting records to determine prices. This pricing approach does not involve examining the market

or considering the competition and other factors that might have an impact on pricing. Cost-oriented

pricing also is popular because it is an age-old practice that uses internal information that managers can

obtain easily. In addition, a company can defend its prices based on costs, and demonstrate that its

prices cover costs plus a markup for profit.

However, critics contend that the cost-oriented strategy fails to provide a company with an

effective pricing policy. One problem with the cost-plus strategy is that determining a unit's cost before

its price is difficult in many industries because unit costs may vary depending on volume. As a result,

many business analysts have criticized this method, arguing that it is no longer appropriate for modern

market conditions. Cost-based pricing generally leads to high prices in weak markets and low prices in

strong markets, thereby impeding profitability because these prices are the exact opposites of what

strategic prices would be if market conditions were taken into consideration.

When considering costs, managers should ask what costs they can afford to pay, taking into

account the prices the market allows, and still allow for a profit on the sale. In addition, managers must

consider production costs in order to determine what goods to produce and in what amounts.

Nevertheless, pricing generally involves determining what prices customers can afford before determining

what amount of products to produce.

By bearing in mind the prices they can charge and the costs they can afford to pay, managers

can determine whether their costs enable them to compete in the low-cost market, where customers are

concerned primarily with price, or whether they must compete in the premium-price market, in which

customers are primarily concerned with quality and features.

Competition-based pricing

With a competition-based pricing policy, the company sets its prices by determining what other

companies competing in the market charge. A company begins developing competition-based prices by

identifying its present competitors.

Next, a company assesses its own product or service. After this step, a company sets it prices

higher than, lower than, or on par with the competitors based on the advantages and disadvantages of a

company's product or service as well as on the expected response by competitors to the set price. This

last consideration-the response of competitors-is an important part of competition-based pricing,

especially in markets with only a few competitors. In such a market, if one competitor lowers its price,

the others will most likely lower theirs as well.

This competitor strategy allowed the entire competitor sell the alike products in average price.

For The Nerves Company, there are many others company that supplying and producing the products of

t-shirt and souvenir. This competition forces our company to compare the quality of the product and the

price of the product. Our company also selects the target of the marketing place and doing many offers

to the public. The targeting people of our company are student in schools and universities and the

organizations of the government. Our company also set up the reasonable price so that all customers

that interested to get our brand feel the affordability to purchase our products.

1.3 Strawbearu Company

1.4 Signoriz Company

This pricing policy allows companies to set prices quickly with relatively little effort, since it does

not require as accurate market data as the demand pricing. Competitive pricing also makes distributors

more receptive to a company's products because they are priced within the range the distributor already

handles. Furthermore, this pricing policy enables companies to select from a variety of different pricing

strategies to achieve their strategic goals. In other words, companies can choose to mark their prices

above, below, or on par with their competitors' prices and thereby influence customer perceptions of their

products. For example, if a Company A sets its prices above those of its competitors, the higher price

could suggest that Company A's products or services are superior in quality rather than others.

For our product, the best pricing strategies that we choose is price adjustment strategies. The

price adjustment strategies allows to adjust the price due to different types of customers and other

conditions. These conditions may be changing competitive environment, changing government

regulations, changing demand situation and meeting promotional and positioning goals.

1. Discounts

Quantity discount

We will make a reduction in price for every unit purchased by a customer. The discount

is given for purchases made in large quantity or above a set amount of money. It may be

cumulative or non-cumulative. Below is our price of the t-shirt:

Quantity Price per unit (RM)

50 35

100 30

150 25

200 20

500 15

Seasonal discount

For the seasonal discount, we make a price reduction for out-of-season products or for

products during low demand season. This strategy is to level out workload. When the

PRICING STRATEGIES

football season is not very popular, we sell our t-shirt of the football fan club at the low

price. It was a low demand among the fan club. Meanwhile, when Korean style starts in

Malaysia, we will make a clearance sale on football fan club’s t-shirt.

Cash discount

Apart from that, we use cash discount whereby a reduction offered to prompt payment

of a receipt. It is created as an incentive for purchases to pay quickly. For our product,

the customer will be given of ‘5/10 net 30’ which is 5% discounts are given if payment is

made within 10 days of invoice date, and the full payment is expected within 30 days.

Functional discount

In addition, we also use functional discount which is a discount for wholesaler and

retailers who perform distribution channel functions for the manufacturer. The functions

they perform may include storage, promotion, etc. Our retailers print the leaflets to

promote the manufacturers products during the festive seasons and gets the functional

discounts from the manufacturers.

2. Zone Pricing

Single-zone pricing means that the seller bills every purchaser an identical flat freight

charges irrespective of the location. A buyer in Johor and a buyer in Kelantan will be

charged equal transport charges for our products that are bought from us in Selangor.

Meanwhile, with a multiple zone pricing, buyers in the same zone pay the same

transportation charge. We may differentiate all buyers in East Malaysia from the buyers

in West Malaysia, and charging two different flat rates for each zone. One quantity of our

t-shirt cost RM25 in peninsular Malaysia and RM30 in Sabah/Sarawak.

3. Odd-even Pricing (Psychological Pricing)

Furthermore, we decide to use odd-even pricing strategy. This strategy is by setting

prices a few ringgit or cents below a round number. Mostly, we use odd-numbered prices

for our products to imply bargains, and even numbered prices to imply quality.

Studies show that when the prices are different, like RM29.99 triggers in our brain as

cheaper. Our products, t-shirt such as have the new design and you think it’s a bargain

because it is set at RM29.90, but if it was set at RM30.00 you might not even think of

buying it. The prices will seem to be much cheaper in the mind of customers than RM30

respectively.

4. Bundle Pricing

For our products, we also use bundle pricing strategy which is a form of promotional

price adjustment that offers discounted pricing when customers purchase several

products at the same time.

Our products often use bundle pricing to sell t-shirt that may not have sold otherwise.

Mostly, the t-shirt will combining with caps, button badge, or pencil box with cost RM40.

Therefore, the customer thinks their getting a package deal and will end up paying more

money than they intended.

The second pricing strategy that we choose is product mix pricing strategies.

1. Price lining

In order to sell our products, we use price lining which is a marketing process where the

products within a specific group are set at different price points. The higher the price, the

higher the perceived quality to the consumer, and it also helps to lead people to the price

range they can afford.

For instance, our products that sells t-shirt at RM20, RM30, and RM40 which shows the

customers which price range the belong to and may sway them into buying the more

expensive pair.

In order to sell the products, we need to decide which strategies are suitable to use.

Therefore, we can sell our products successfully and smoothen the selling of the products. Once decision

on products, distribution, and promotion are made, we have to decide on the price of the products. As

pricing is the marketing strategy that brings revenue to our company.

In our opinion, choosing the right price will determine the survival of our company in the market.

In making such decisions, we must determine its objectives. It also needs to analyze any other factors

that will influence the price decision. Therefore, from the analysis we need to select the right price

strategy to determine the product’s base price. From time to time, there will be adjustments to the price-

adding or reducing from the base price in order to suit the situation. But, each of the strategies has their

own advantages and disadvantages. For example, discount pricing will build customer loyalty, maximizing

sales, more units are sold, temporarily raise revenue and profit.

In the same time, pursuing a discount pricing strategy increases the chance that the product will

be perceived as lower in quality. While you may gain customers who make decisions on price alone, other

customers may choose competitor products because of perceived quality. Low prices may drive sales for

a limited time, but do not build customer loyalty. When a lower priced alternative comes along, you may

lose your hard-earned market share. Competitors can simply match your prices, or beat them. When

prices have been driven down to absolute low prices, it is difficult to raise prices again, especially if your

product is perceived as being lower in quality.

Pricing is a visible component of our products’ marketing mix and an effective tool for competitive

advantage. However, it is easy for our products to follow any price reduction to prevent losing out. This

dramatic matching is common in industries of relatively homogenous products. As a result, many

companies may go for stable price and compete on other marketing mix elements like product, place and

promotion.

CONCLUSION

APPENDIX