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Topic Examination of Price Setting

Free Essay Sample «Topic Examination of Price Setting»
Introduction Price-setting is analyzed from three points of view: the way firms take into account price market competition in setting their price, the way they use price discrimination, and the proportion of them that incorporate expectations when setting their current price. Hazarika (2005) analysed that ?[a] firm must set a price for the first time when it developed a new product, when it introduces its regular product into a new distribution channel or geographical area, and it enters bids on new contract work. The firm must decide where to position its product on quantity and price?. Saha (2009) states that most markets have three to five price points. Marriott Hotels is a good at developing different brands for different price point: Marriott Vacation club?
Vacation Villa (highest price), Marriott Marquis (high price), Marriott (high-medium price), Renaissance (medium- high price), Courtyard (medium price), Towne Place Suites (medium-low price) and Fairfield Inn (low price). The firm has to consider many factors in setting its setting its price policy. These six procedures are determined to setting the price (Thompson 1989). ? Selecting the price objective; ? Determining demand; ? Estimating cost; ? Analyzing competitors cost, prices and offers; ? Selecting a pricing method and ? Selecting the final price. Examination of price setting A firm will be ready to set price when it have three Cs (the customers demand schedule, the cost function and competitors prices).
The Firm select a pricing method that includes is to these three considerations. There are six methods of examination of price setting: markup pricing, target-return pricing, perceived-value pricing, value pricing, going-rate pricing and auction-type pricing. Markup pricing: The most elementary pricing method is to add a products cost. The formula of determining the markup pricing is; Makeup price = unit cost (1-desired return on sales) Target-return pricing: In Target-return pricing the firm determines the price that would yield its target rate of return on investment. The formula of Target-return pricing is; Perceived-value pricing: An increase number of companies now base their price on the customer?s perceived value. They must deliver the value promised by their value proposition and customer must perceive the value. Value pricing: In recent years distinct companies have approved value pricing method. They win loyal customers by charging a fairly low price for a high quality offering. Going- rate pricing: In going-rate pricing the firm bases its price widely on competitor?s prices. The firm might charge the same, more, or less than major competitors (Hazarika 2005) Auction-type pricing: Auction-type pricing is increasing more popular, especially with the growth of the internet.
The major reason of auction is to arrange of surplus inventories or used goods. Companies need to be conscious of the three major types of Auctions and their disunite pricing procedures. ? English auction: One seller and many buyers. ? Dutch auction: One seller and many buyers, or one buyer and many sellers. ? Sealed-bid auction: Would- be suppliers can only one bid and cannot know the other bids. These are the main methods of examining of price setting. The procedure includes examination of: company goals, approaches to setting an initial price, different types of price arrangements marketers make before planting on a final selling price, and paying options.

Free Essay Sample «Topic Examination of Price Setting»

 

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