Dynamic Pricing Strategies for Maximizing Customer Satisfaction
National Public Accountant, 44(1), January/February 1999, 8-36
3 Pages Posted: 6 Oct 2013
Date Written: January 1, 1999
Accountants are often asked for advice on pricing products, and their input is often quite helpful and necessary. Accountants, however, are very likely to focus on costs when trying to advise management on appropriate pricing strategies. Economists might focus on rules for maximizing short-run profits, i.e., set marginal revenue equal to marginal cost. This is because economists are more interested in studying the demand-curve for a product than in focusing on the actual costs; they are concerned with using demand (marginal revenue is derived from the demand curve) to determine the optimum price. Marketing executives, on the other hand, are more likely to focus on the different consumer segments since marketers are attuned to the idea of market segmentation. Market segmentation involves dividing the market into distinct groups of customers, each with their own needs, and considering each as a possible target market. The firm will then decide which segments to target and will provide the selected target markets with different products and/or different marketing mixes. Each of these approaches are valuable in pricing.
The purpose of this paper is to introduce accountants to ideas from marketing and economics that can be quite helpful in determining the ideal price to charge for a product or service.
Keywords: pricing, market segmentation, dynamic pricing
JEL Classification: A22, A23, D81, G18, G21, I20, L20, L21, M14, M19, M31, Q20, Q38
Suggested Citation: Suggested Citation