Discuss pricing and non-pricing strategies

There are a number of pricing and non pricing a firm may use in order to seize market share, increase its total revenue and hence profits. Some pricing methods involve, a reduction in prices, predatory pricing, limit pricing or bulk buy discounts. Non-pricing methods on the other hand involve, advertisement, research and development, buy one get one free offers etc.

One pricing strategy may involve a reduction in prices, making its own product more desirable on the goods market. As a result, this will lead to an increase in the quantity demanded of the particular product, leading to an increase the the revenue of the firm and hence profits. This is assuming, that it's rivals will not want to compete against it and also reduce their corresponding price levels to its level or even lower, which may cause the firm to go bankrupt if it is unable to compete against its competitors. Another pricing strategy that may be considered by larger firms is predatory pricing, which involves the setting of price levels below one's own average cost curve in the short-run with the aim of causing its rivals to go bankrupt. It's otherwise described as an aggresive and illegal pricing strategy and hence may attract the attention of a prosecutor that may take prosecute managers, taking them to criminal court where they may face jail sentence, as well as a heavy fine to pay. The main reason for such a pricing strategy to be illegal is due to the fact it doesn't act in the favour of the consumers, as well as employees.

One non-pricing strategy that may be conducted by a firm, is an increase in research and development, leading to the discovery of newer, better functioning, high quality goods. This in turn will also be associated with an increase in demand as it thwarts its rivals lower quality goods, whilst at the same time attract consumer's of a higher quality market e.g. Apple smart phones vs Nokia phones. However, this is making the assumption that research and development will be successful, which in many cases has proven to not only be costly (apple spent $2.8 billion on research and development in the last quarter) but also runs the risk of being unsuccessful, which has been the case with a lot of start-up firms. This in turn could thwart the firms plans and may even lead to a significant increase in its costs, forcing the firm to increase its prices to compensate for the rising costs, making it uncompetitive in the market in terms of prices.