What are 3 factors considered when determining prices?
|
Setting a product price is an art and a science. It is both a business and a personal decision, factoring in how much you need to earn to make a living, along with your values and marketing messages. Your products can be priced strictly based on financial considerations, or you can use prices to differentiate your company from your competition, or send a message to your customers about quality. Show
TipThe factors to consider when setting price include cost and margin, competition and your own discretion. Pricing Based on Cost and MarginYour price needs to be sufficient for you to recoup your costs and to earn a little extra in profit. It should cover both direct costs, or the materials and labor that went into producing the item, as well as indirect costs, or expenses such as rent and utilities that you incur to keep your business running. Direct costs make up a fairly consistent percentage of the price you charge. For example, if you operate a food service business, your food costs should average around 33 percent of your price and labor costs should average around another 33 percent. The percentage of your price that goes towards indirect costs decreases as your volume increases. If your rent is $1000 per month and you charge $3 for a cup of coffee, one third of the purchase price will go toward rent if you sell 1000 cups of coffee per month, and one thirtieth will go toward rent if you sell 10,000 cups of coffee per month. Research what Your Competition is ChargingBefore setting prices, do some research to find out what your competition is charging. Then consider how you want to set your products apart from your competitors' offerings. If your products are very similar, then a lower price can give potential customers a reason to choose yours over the other alternatives. If your product is of noticeably higher quality, a higher price will reinforce this fact, and can even make your offerings more desirable. Use Your Own DiscretionTo some extent, you can charge whatever you want for your products, as long as long as customers are willing to pay and you're asking enough to cover your expenses, along with a little extra. If money is the bottom line for you, try pushing the limits to see what the market will bear. You'll increase your odds of successfully charging a higher price, if you find a way to add intangible value to your offerings, such as by creating buzz, as Apple has done so successfully. Conversely, if your company's mission is to provide something useful at an affordable price, you may choose to charge less than the market will bear, so that your customers will get the best possible value. Article shared by : 7 important factors that determine the fixation of price are: (i) Cost of Production: Cost of production is the main component of price. No company can sell its product or services at less than the cost of production. Thus, before price fixation, it is necessary to compile data relating to the cost of production and keep that in mind.  Image Courtesy : becauseblogdotcom.files.wordpress.com/2013/07/otter-wax-europe-distribution1.jpg There are two types of cost: (i) Fixed Cost (e.g., Rent of building, Salary of permanent staff, etc.) (ii) Variable Cost (e.g., Material, Labour, etc.). At least the price should be able to recover the variable cost as the fixed cost is incurred whether the production takes place or not. (ii) Demand for Product: Intensive study of demand for product and services in the market be undertaken before price fixation. If demand is relatively more than supply, higher price can be fixed. (iii) Price of Competing Firms: It is necessary to take into consideration prices of the products of the competing firms prior to fixing the price. In case of cut-throat competition it is desirable to keep prices low. (iv) Purchasing Power of Customers: What are the purchasing power of the customers and at what price and how much they can purchase? It should also be taken into consideration. (v) Government Regulation: If the price of the commodity and services is to be fixed as per the regulation of the government, it should also be borne in mind. (vi) Objective: Usually, at the time of price fixation a certain amount of profit is added to the cost of production. If company’s objective is to earn higher profit it may add higher amount of it. (vii) Marketing Method Used: Price is also influenced by the marketing method used by the company, e.g., commission which is to be paid to the middlemen for sale of the goods is also added to the price. Similarly, if the customers are to be provided “after sale service” facility, then those expenses are also added to the price. What 3 factors are the price determined?The main determinants that affect the price are: Product Cost. The Utility and Demand. The extent of Competition in the market.
What are the factors to consider in determining price?Five factors to consider when pricing products or services. Costs. First and foremost you need to be financially informed. ... . Customers. Know what your customers want from your products and services. ... . Positioning. Once you understand your customer, you need to look at your positioning. ... . Competitors. ... . Profit.. What are the 3 main basis for pricing?Cost-Based Pricing. Value-Based Pricing. Competition-Based Pricing.
What are 3 questions to consider when determining the price of a product?10 Questions to Ask When Pricing Your Product. What is the customer willing to pay for my product? ... . What kind of customer do I want to target?. How should I react to my competitor's prices? ... . Can I offer different levels of products or services at different price points? ... . How can I adjust my prices?. |
