Psychological discounting – offer discounts from normal prices to increase sales and reduce inventories.
Value Pricing
During the recessionary, slow-growth, many companies adjust their prices to bring them into line with economic conditions and with the resulting fundamental shift in consumer attitude to ward quality and value. More and more, marketers have adopted value pricing strategies - offering just the right combination of quality and good service at a fair price. In many cases, value pricing has involved redesigning existing brands in order to offer more quality for a given price or the same quality for less.
International Pricing
Companies that market their products internationally must decide what prices to charge in the different countries in which they operate. In some cases, a company can set a uniform worldwide price. For example, Boeing sells its jetliners at about the same price everywhere, whether in US, Europe or a Third world country. However, most companies adjust their prices to reflect local market conditions and cost considerations.
General Pricing Approaches
Cost-based Pricing- is the simplest pricing method – adding a standard markup to the cost of the product. Example:
Variable cost ------------------------------- Br 10
Fixed Costs --------------------------------- Br 300,000
Expected unit sales ------------------------- 50,000 units
Then the manufacturer’s cost per unit is given by: Unit cost = variable cost +Fixed costs/unit sales.
= 10+300000/50000=Br 16
If the manufacturer wants to earn a 20% markup on sales, the manufacturer’s markup price is given by: Markup price = Unit cost/(1-Desired Return on Sales) = 16/1-0.2 = Br 20
Does a using standard markup to set prices make sense? Generally no. Any pricing method that ignores demand and competitive prices is not likely to lead to the best price. Markup pricing works only if that price actually brings in the expected level of sales.
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