Pricing occurs when a seller states prices or price savings that mislead consumers

5. Research

Research can help you find the optimum price for your products. Generally, the optimum price is one that your customers are willing to pay, without it affecting your profits. This isn't a one-off activity, you must monitor your key pricing influences regularly as part of your overall market research to ensure your prices stay competitive and you still meet your customers' expectations.

Market testing

To help you determine how much your customers are willing to pay for your product or service you should perform some form of market testing. As a start, research your customer's purchasing behaviour such as:

• their current and anticipated demand for this type of product or service
• what they pay for similar products or services
• the quantity likely to be purchased
• additional features they value.

With this customer information in mind, you can then develop a price comparison offering a number of different product or service options for testing to help you determine a price range that is acceptable.

Competitors

You should have already determined who your direct competitors are and how your business compares to them when you developed your marketing plan. This information can be useful to help you determine your price point.

If you decide to use your competitors' prices as a guide, be careful that it doesn't dictate your prices too much, as it can seriously undervalue your product or service and drive down your profits.

When you compare your business to competitors, it's also important to ensure you look at the business as a whole and compare on other value-based traits (such as special features, quality and customer service) as well as price.

Influences

Pricing influences are external factors that can impact the price of products. Four influences that you may encounter include:

• price sensitivity
• level of demand
• level of competition
• government regulation.

Price sensitivity

Price sensitivity refers to price fluctuations as customer demand increases and decreases. For example, commodity goods such as petrol have high price sensitivity. The difference of a few cents in price can impact a customer’s behaviour.

Some markets are more sensitive to price increases than others. Price sensitivity can change over time based on a number of factors including changes in the economic environment, competition or demand. Factors other than price, such as quality, service, and uniqueness, can also influence price sensitivity.

Level of demand

Product and service demand can influence your prices. If there is high demand, it is likely you can increase your price. Price can also influence demand. For example, if the price lowers, then demand can temporarily increase.

Level of competition

Competition can also influence your product’s or service’s price. In general, the less competition you have, the more demand there is for your product. If a new competitor enters the market, the competitor can affect your price.

Government regulations

Government regulation can influence your pricing decision, as additional fees or levies may increase the sale price of your product or service.

setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors prices

optional product pricing:

the pricing of optional or accessory products along with a main product

setting a price for products that must be used along with a main product, such as blades for a razor and games for a video game console

setting a price for by products in order to make the main products price more competitive

combining several products and offering the bundle at a reduced price

a straight reduction in price on purchases during a stated period of time or in larger quantitities

promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturers products in some way

selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

pricing that considers psychology of prices and not simply the economics; the price is used to say something about the product

prices that buyers carry in their minds and refer to when they look at a given product

temporarily pricing products below the list price, and sometimes even below cost, to increase short run sales.

setting prices for customers located in different parts of the country or world

a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the facotry to the destination:

uniform-delivered pricing

a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location

trade in allowances, promotional allowances: 

trade in: a price reduction given for turning in an old item when buying the new one. Promotional: payments or price reductions that reward dealers for participating in advertising and sales support programs

a geographical pricing strategy in which the company sets up two or more zones. all customers within a zone pay the same total price; the more distant the zone, the higher the price

a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer

freight-absorption pricing

a geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business

adjusting prices continually to meet the characteristics and needs of individual customers and situations

assessing and responding to competitor price changes: model

public policy issues in pricing model:

selling below cost with the intention of punishing a competitor or gaining higher long run profits by putting competitors out of business

retail(resale) price maintenance:

manufacturer cant require delears to charge a specified retail price for its product

occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers

What is consumer pricing?

What is by

What is an example of captive pricing?

Is a pricing strategy in which goods are placed free on board a carrier the customer pays the freight from the factory to the destination?