There are various ways in determining the price. Each method is used in different situations. Because the price is the decisive factor in determining the success of your business.
Determination of the optimal price depends not only on production costs you incur in producing goods and services. Factors such as competitors, suppliers, and the availability of substitute goods contribute to determine the price. Here we will convey various pricing strategies used in different situations:
Cost plus mark up
With this strategy, you specify the desired profit before put price. This method helps you focus on profit, but can also cause prices beyond the expectations of consumers and the price of a rival company.
In setting competitive prices in the market, you have to look at the price offered by competitors and use it as a benchmark for setting the price of your product. Your strategy will determine whether your price equivalent, slightly below, or slightly above the competitors.
You can use this method if you have a product that is unique and does not have a substitute goods. Prices are set high, thus providing a high margin for the seller. The buyers are those who are willing to pay for the uniqueness of the product. In terms of basic needs products, consumers do not have any other choice. Often, price skimming is a short-term strategy while competitors are also marketing the same products, prices are lowered.
This method is the opposite of price skimming. Determined price below cost in order to get a large market share. Because penetration price does not cover the cost, this is also a temporary strategy. Because this strategy profitable, consumers should be willing to pay the normal price, the price is higher.