How to set the price……? If you are interested to produce and sell something in the market, u must prioritize your price strategy. Here are some steps of setting the price. 1. Selecting the price objectives There are 5 major objectives of price setting a. Survival: Your company must be survive after selling something b. Maximum current profit: profit should be maximized c. Maximum market share: maximize market share through low cost and quality stragety d. Maximum market skimming: you must skimming the market e. Product quality leadership: you should lead the market through quality product f. Other objectives 2. Determine Demand Demand determination is one of the significant process of price setting… you must analyse following variables to determine demand a. Price sensitivity: maximum customers are price sensitive and you must understand the consumers’ price strategy. b. Estimating demand curves c. Most companies make some attempt to measure their demand curves using several different methods i. Surveys ii. Price experiments iii. Statistical analysis iv. Price elasticity of demand 3. Estimating cost There are various toots for estimating cost a. Types of cost and levels of production: like fixed cost, variable cost, marginal production b. Accumulated production: increase in production reduces the cost c. Target costing 4. Analyzing competitors’ cost , price and offers You have to understand and amylase your near competitor’s cost, price of production and what kind of offers they maintain 5. Selecting the pricing methods There are various methods of pricing are available… if you want to choose they are as follows a. Markup Pricing: First you need to calculate your unit cost by using this formula Unit cost= vc+ fc/units sales And then you need to calculate ur markup price Markup price= unit cost/(1-desire return on sales) b. Target return pricing If u want to use this methods then u need to calculate target return price by this formula Target return price= unit cost+(desire return on sales*invested capital)/unit sales c. Perceived value pricing: You have to show different price scheme to the customers and u need to know their perceived towards products d. Value pricing e. Going rate pricing f. Auction type pricing There are three types of action i. English action ii. Dutch auction iii. Sealed bid auction 6. Selecting the final price In this stage you have to understand following things a. Impact of the other marketing activities b. Company pricing policies c. Gain and risk sharing policies d. Impact of price on other parties If u completed all these steps, now you are no of the good price maker in the business world.
Posted on: Sun, 10 Nov 2013 09:30:03 +0000
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