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PRICING OBJECTIVE
Profit oriented : Target return
Maximize profit
Price
Exchange value in money term
Seller
Exchange
Customer
Product
Money
Pricing method
Based Based Based Based on on on on cost demand market customer
Based on Cost :
Mark up pricing : Adopted by sellers
find the total cost & expenses incurred on the purchase of the item then add a mark up . This mark up may be fixed amount or percentage of purchase cost .
Add to total cost a profit margin, profit can be fixed amount or percentage of total cost .
Based on Market :
Form of market Number of firms Nature of product Price elasticity of demand Degree of control Example
Monopoly
One
Unique product
Very small
Considera ble
Railway
Monopolistic
A large no of firms
Some
Oligopoly
Few firms
Some
Based on Customer :
The customer is asking the seller to bid his price . The customer / buyer provides the details and specifications material to be purchased. The seller will then calculate their own costs and price the item as they deem fit .
Penetration price
Skimming price
Penetration price :
Initially fixing low price later increase to market level this is applicable to me too product such product are already available and there is no difference in our products . Generally applicable to consumer items low value item, convenience goods.
Skimming price :
Charge initially high price to recover. cost of high technology sometimes the first mover wants to take advantage of charging monopoly price. Later, after the market in picking up or more new competitors have entered start charging low price to take advantage of your name as first mover.
This can be applied to high technology products, computer peripherals engineering and electronics items gift.
Conclusion
There are many factor determining the price, but I have explained only few fields or factor. Pricing strategies is a very important concept in the German companies strategies planning.
Price is the main factor that determine the Brand name or Goodwill.
Question Answer
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