The art of making decisions on aspects of the products in the real managerial setup is so hard. Theoretical aspects of product management appear to be so simple to implement. Actual practice of the theories present appreciable technicalities to the product managers. Product management decisions need consistent reviewing to ensure that the business thrives. The decisions made can be long-term, short-term and may require different levels of commitments of the business entity. Making right decisions based on the real conditions in the business and that synchronises with the theoretical ideal conditions is, therefore, a necessity. The paper covers pricing and other product management decisions as practiced in the real business environment. It evaluates the practices of the business based on pricing theories such as cost-based approaches and economic approaches.
Working in the real business environment involves facing conditions that require application of different knowledge and techniques. The rapid change in the parameters of the business makes the process of decision making even more complex. The structures that guide the process of decision making regarding product management are supposed to be adaptive to the changing conditions as noted by Fixson (pg. 345). Otherwise, the notion of strictly following theoretical guidelines while making sensitive decisions regarding the pricing and product management can lead to business failure. Pricing of the product is very sensitive and it deserves appropriate consideration. The sensitivity concerning decisions related to price have led to the shutdown of major companies in the airline industries as noted by Yeomon (pg. 230). Yeomon observes that most product managers take decisions on pricing of products more seriously than they do to other aspects relating to the product (pg. 231). Management accountants prefer the application of economic approaches as opposed to cost-based approaches. Efforts of concentrating on cutting on costs are currently infamous. Most managers, therefore, tend to perform value addition on their products and set considerable higher prices that are of appreciable quality to the customer. Their target is to emphasize on right quality to impress the customer. The customer will overlook the high price in the long run due to the increased value added to the product.
In making decisions in product management, managers usually have a task to vision the product over a given period. Creating a vision of the product and its market performance is in line with the requirement of management theory. Pitta says that creating the vision alone does not mean that the product will do well and earn the business some good profit margins (pg. 417). The vision on the product is usually based on cost minimization while performing value addition. Well, the mode of achieving the vision could be stipulated in writing, but following it strictly cannot do the business any good in certain conditions. Product managers, therefore, make certain decisions that suit their unique conditions opposed to basing their arguments on the stipulated strategies. Miraldo records that embracing a contingency approach towards pricing of the product have proved to be beneficial in most cases (pg. 178). Miraldo considers the fact that many factors that happen in the real situation are not captured by the theoretical requirements in management practice (pg. 190). It has been noted that most managers do embrace economic approaches in production and when setting prices to save them from the complications arising from trying to follow the cost-based theoretical plans.
Pitta notes that the key aspect in the management of the product in the real world has been the emphases on branding of the product (pg. 418). The cost accountants know that the determination of the real cost of the product is not insignificant. The product pricing proves to be harder as it depends on other psychological factors. Most companies try to have control over the factors by doing good branding as opposed to performing extreme value addition to the product. Many companies focus on developing good corporate image and in getting their product positioning right. Heenan says that the product managers have concentrated in building brands and positive corporate image to encourage the acceptance of their inflated prices (pg. 18). Many companies, therefore, maximize in building a positive corporate image to avoid focusing on cost reduction when pricing.
Many firms in the real situation have not realised that prices alone do not drive the sale of their products. Sinha says that in pricing a product, a broad consideration of what drives sales should be considered (pg. 196). To some organisations, the approaches and theories applied in pricing do not matter. Correct sales strategy and hiring of the best sales persons are key to ensuring proper product management. Product managers should recognize that price of the product is a function of the ability of the organisation to sell. Common cases where the companies had made mistakes were when they decided to set their prices below their competitors.’ The companies do this with the expectation of attracting more sales. However, they fail to understand that the customers’ views on the low priced products are negative. Customers perceive such products as having low quality. Lowering prices excessively has proved to be a setback to many organisations. Pricing decisions, therefore, require less focus on the idea of making the product cheaper in the market, but requires proper product marketing and positioning.
In conclusion, the greatest factor that the companies do consider when making product decision is the customers. In the real business world, product managers value the customers more than other aspects and they always strive to understand their needs at any given time. Many successful firms would rather embrace the economic approaches than the cost-based approaches when making decisions on the product.
Works Cited
Heenan, David A.. "Pricing: Value Pricing Goes Global." Journal of Business Strategy 14.6 (1993): 18-19. Print.
Fixson, Sebastian K.. "Product architecture assessment: a tool to link product, process, and supply chain design decisions." Journal of Operations Management 23.3-4 (2005): 345-369. Print.
Miraldo, Marisa. "Reference pricing and firms’ pricing strategies." Journal of Health Economics 28.1 (2009): 176-197. Print.
Pitta, Dennis A.. "Product innovation and management in a small enterprise." Journal of Product & Brand Management 17.6 (2008): 416-419. Print.
Sinha, Ashish. "Practical pricing: Translating pricing theory into sustainable profit improvement." Journal of Revenue and Pricing Management 10.2 (2010): 195-196. Print.
Yeoman, Ian. "Book ReviewThe Future of Pricing: How Airlines Pricing Has Inspired a Revolution." Journal of Revenue and Pricing Management 7.2 (2008): 230-231. Print.
