Pricing methods - tips, examples, calculations. Pricing methods for enterprise products Pricing dependence

Pricing- is the formation of prices for goods and services. There are two pricing systems:

• market pricing, operating on the basis of the interaction of supply and demand,
• centralized state pricing - formation of prices by government agencies.

At the same time, within the framework of cost pricing, production and distribution costs are used as the basis for price formation.

Pricing Methods

The following pricing options can be roughly distinguished:

• based on full costs (“costs +”);
• based on marginal costs (marginal costs, reduced costs, direct costs);
• based on turnover income;
• based on return on investment;
• taking into account breakeven;
• pricing based on consumer demand;
• parametric pricing methods;
• method of comparison of specific indicators;
• aggregate method;
• setting current prices;
• method of following the competition leader;
• tender method.

Full cost method implies that the price is based on all the costs of the enterprise for the production and sale of products (fixed and variable), the full cost of the product is calculated, and the amount of profit is added to it. Since fixed costs are distributed among all types of products in proportion to some indicator, then with different methods of distribution, depending on the choice of base, the level of cost of the product also fluctuates. As a result, to the listed disadvantages of this method one more is added - the actual cost of the product is distorted, and this leads to underestimation or overestimation of the price. In fact, many commercial enterprises also use this technique. A more progressive and reasonable method is the standard (normative) total cost method.

Its essence lies in the fact that the price is based not on actual, but on standard costs, and the deviation of actual costs from norms is constantly taken into account. This pricing method has several advantages over simply recording actual costs. It makes it possible to manage costs, since they calculate not just the total amount of deviation, but in the context of each item. Also, this method

• carries out factor analysis of cost items,
• identifies what caused the price deviation from the standard,
• provides the ability to continuously compare cost items with financial results, regardless of production capacity utilization.

This method guides manufacturers to reduce costs. The most difficult moment when introducing a system of normative (standard) costs is the determination of progressive and reasonable cost standards, which involves a detailed study of production methods, technical characteristics of products, etc.

Marginal cost method involves taking into account in the price of products only those costs that arise when producing each additional unit of product in addition to the already mastered production. These costs are called differently in the economic literature: marginal, marginal, reduced, direct, but in practice they are usually considered variable costs. The application of this method is based on the principle of marginal profit, through which fixed costs are reimbursed. The marginal cost method is more complex than the full cost method, as it is focused on a multifactor approach to pricing. If it is used, the enterprise estimates the potential sales volume at each expected price. It is used in various situations:

1. If the enterprise has free production capacity and fixed costs are already covered by the current production volume. In this case, in order to expand sales volume, the company can set prices taking into account only variable costs.

2. If an enterprise needs to gain market share, and it intends to use a market penetration pricing strategy, that is, the price of its product is set lower than the price of a similar product. In this case, it is taken into account that it is impossible to use this method for a long time, since ultimately it is necessary to reimburse all costs and make a profit. The enterprise must have financial resources to maintain product prices at a given level, or this method is used only when determining prices for several types of manufactured goods. Its most effective use when making management decisions:

• about the price of products with available free production capacity;
• on accepting an order from the state or another enterprise with guaranteed sales;
• produce or purchase components;
• about the feasibility of producing a particular product with limited production capabilities.

Revenue based pricing method, also involves taking into account the full costs of the enterprise. In addition, he must provide him with the planned (desired) amount of income from turnover. In trade, distribution costs will be offset by gross income, and this must be taken into account when determining the desired level of turnover income. The calculations made will help trade enterprises justify prices taking into account their needs. The price determined by this method serves as a guide and allows you to compare the price level with the prices of competitors. If it is too high, then you need to look for ways to reduce costs or new supply channels with lower prices for purchasing goods in order to ensure the desired level of income.

Return on investment (return on invested capital) method, is used in pricing new products, the production and sale of which require capital investment. This method is the only one that takes into account the payment of financial resources. In trade, it is used to determine the minimum price when using a loan to purchase a batch of goods.

Carrying out calculations makes it possible for a retail trade enterprise to compare the minimum and retail prices with the level of market prices for similar goods and determine whether the products will be in demand at such a price and whether it makes sense to purchase them on such conditions. In addition, the use of this method allows you to make informed decisions about the size of production volumes or batches of goods at known market prices, because the amount of payments for using a loan per unit of product (good) depends on the scale of activity. In conditions of inflation, it is difficult to use this method due to the high level of interest rates and their uncertainty over time, as well as the difficulty of predicting the level of market prices.

Method of break-even analysis and determination of target profit, cannot be called a price determination method. In essence, this is the calculation of various options for the volume of production or trading activities, allowing to achieve break-even and obtain a target (planned) profit at certain costs and different prices. The calculations are based on the idea that upon reaching a certain scale of production and trading activities, the enterprise covers all its costs (fixed and variable) and with a further increase in volume begins to make a profit. In economic literature, this volume of production and trading activity is called:

• break-even point
• profitability threshold,
• threshold sales volume,
• breaking point, etc.

At the break-even point, revenue from sales of products covers the costs of the enterprise. The break-even point can be determined analytically or graphically. The break-even point depends on the amount of costs (the ratio between fixed and variable) and price: the higher the price, the lower the production volume ensures break-even at constant costs. The basis of break-even analysis is the search for the most profitable combinations between variable costs per unit of product, fixed costs, price and production volume.

To determine prices in order to achieve break-even production, an estimated sales volume standard is used, which itself depends on the price. Analysis of the break-even of an organization's activities has specifics - in trade and public catering, costs are covered by gross income, therefore, when calculating the break-even of trading activities, an indicator of the level of gross income is used, depending on the turnover and the level of the trade markup. The break-even of a trading enterprise shows the volume of turnover at which the enterprise covers costs. The level of gross income depends on the level of the trade markup; with different options for the trade markup, its size and the amount of gross income will fluctuate, respectively, the price and volume of turnover required to achieve break-even. Thus, using the planned data, it is possible to carry out interconnected calculations of the main indicators.

Pricing based on consumer demand. Many experts believe that demand is the only factor that should be taken into account when justifying the price. Enterprises that focus on this approach to pricing use the consumer evaluation method, which is based on the perceived importance of the product by the consumer and the willingness to pay a certain amount of money for it, i.e. consumer assessment of the product to potential buyers and their perception of price. With this approach, the enterprise proceeds from the fact that the consumer himself determines the relationship between the value of the product for him personally and its price, comparing with the prices of similar products on the market.

The usefulness of a product (a set of useful properties of systemic quality) for the consumer predetermines his willingness to pay a given price, i.e. maintain the level of effective demand. The price change is made dependent on changes in the level of demand for the product in such a way that the price increases when demand increases and decreases when it decreases, and production (sales) costs are taken into account only as a limiting factor showing whether the product can bring profit to the enterprise at a price determined by this method profit. The use of this method is effective in the market for interchangeable goods, which allows the buyer to compare products and choose the one that best suits his desires.

The enterprise's task is to differentiate its products on the basis of technical properties, design, packaging, after-sales service, etc. and to attract the attention of potential buyers to these qualities. Using this method requires a good knowledge of your potential client, his needs, as well as competitors' products. Product differentiation also implies market differentiation: an enterprise works with several consumer segments, each of which has different assessments of the individual consumer properties of the product, which implies a wide range of prices.

Parametric Pricing Methods are based on determining the quantitative relationship between prices and the basic consumer properties of a product included in the parametric series. A parametric series is a group of products that are homogeneous in functionality, design, manufacturing technology, but have differences in consumer characteristics (for example, for refrigerators this is power, size, freezer volume, energy intensity, etc.).

These methods are used to justify prices for new products, as well as to determine whether the expected price level, calculated on the basis of production costs, corresponds to prices prevailing on the market. Such pricing methods include the method of comparing specific indicators, the method of point parametric estimates, the method of correlation regression analysis, and the aggregate method.

Method of comparison of specific indicators used to calculate the price of goods whose consumer value is characterized by one main consumer parameter (power, performance, weight, service life, etc.). This method is the simplest and is applicable to such products where one or two parameters matter, and other characteristics of the product are approximately the same.

Parametric scoring method. The product that the company is going to sell on the market is evaluated according to parameters that are important to consumers (material, design, fittings, fashion, etc.), and each parameter is assigned a rank number according to importance: 1, 2, etc.

Specialists set a weight index (%) for each product depending on its significance, with the total sum of weight indices being equal to 100%, and evaluate their product and competitors’ products using a 10-point system. By multiplying the score by the weight index and dividing by 100, an estimate of each parameter is obtained; the sum of these parametric estimates gives the overall parametric score of the product. Having chosen a product of a company as a standard (a product that is best sold on the market, which indicates the consistency of price and quality) and, taking the overall score it received as 100%, the estimated percentage of other products is determined.

The essence method of "correlation regression analysis" consists in determining the dependence of price changes on changes in several basic quality parameters within the parametric series of goods. To construct functions, a parametric series is made, i.e. accumulate initial information about prices and quality characteristics (parameters) of goods. After statistical processing of the initial data using the method of correlation regression analysis, a quantitative relationship is found between the price change and the change in parameters and a regression relationship equation is constructed. The method can be successfully used in a market economy, especially for complex products with a large parametric range, as it allows one to identify the dependence of price on many factors, i.e. take a more reasonable approach to determining its level.

Aggregate method consists of summing up the prices of individual structural parts of products included in the parametric series, adding the cost of new parts and standard profit.

Method for setting current prices used by businesses that rely solely on competition and set a price slightly higher or lower than competitors, it is believed to reflect the collective wisdom of the industry. This method is used in a market where homogeneous goods are sold under conditions of pure competition. Under these conditions, it is not possible to sell the goods at a higher price; at the same time, there is no need to set a lower price, since the goods can be sold at this market-acceptable price.

A distinctive feature of enterprises that apply this approach to pricing is that they do not seek to maintain a constant relationship between prices and costs or the level of demand - the enterprise will change the price of a product only when competitors change their prices. The main task in these conditions is to control your own costs. This pricing can be used by enterprises that find it difficult to determine their own costs per unit of production and consider the average prices formed on the market as the basis for their own, so they get rid of the risk of setting a price that the market will not accept.

Method of following the competition leader used in an oligopolistic market where there are a limited number of seller enterprises. As a rule, these enterprises strive to sell their goods at the same or similar price, because... each of them is well aware of the prices of its competitors. The price level in this market is determined by the goals that the companies dominating the market set for themselves, or by an unspoken agreement between participants.

Under these conditions, smaller enterprises follow the price leader, allowing themselves only small price discounts. In such a market, prices change from time to time following changes in production costs. In this case, one of the enterprises takes on the role of leader, raising or lowering the prices of its goods, and all the others do the same. This method is used if it is difficult for an entrepreneur to predict his own costs, demand or the reaction of competitors - the most reasonable thing in such a situation is to follow the competitive leader.

Tender method or closed bidding method, is specific and is used in the event of a struggle between several enterprises for the right to receive a contract (for construction, development of natural resource deposits, supply of industrial and technical products, etc.). The goal of firms is to obtain a contract and push aside competitors. To implement it, it is necessary to take into account and identify competitors: the higher the price, the lower the likelihood of receiving an order, and vice versa. Thus, when offering a price, the company proceeds from the prices that competitors can offer, and not from the level of its own costs or the amount of demand.

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Definition of the term pricing

Target pricing

Methods pricing

Theoretical aspects of pricing management in an enterprise

Concept, types of prices and their classification

Main factors influencing pricing

Relationship prices and finance

Pricing management for enterprise

Pricing policy and process pricing for enterprise

Pricing methods for enterprise products

Improvement process establishing prices for products

Pricing: Survival Strategies

Pricing strategies in market analysis

Pricing strategies: if you don't cheat, you won't sell

Definition of the term pricing

Pricing is setting prices, choosing the final price depending on the initial cost of the product, competitors' prices, the relationship between supply and demand and other factors.

Pricing - setting prices, the process of choosing the final price depending on initial cost products, competitors' prices, the relationship between demand and offers and other factors. Basic approaches to setting prices:

Based on closed bidding, based on the expected price offers of competitors;

Based on perceived value, based on the consumer's perception of the value of the product;

Based on the current price level, based on the current prices of competitors.

Purpose of pricing. Ensure motivated, timely and sufficient price response, in such a way as to obtain maximum sales volume with minimal loss of margin.

You need to understand that the pricing of this or that goods always depends on the goals set by the organization. And the goals are very different:

Survival organizations. Those. it is necessary to set such a price for product which will allow companies survive in the competition. Obviously, such situations do not come from a good life;

Profit maximization;

Market expansion sales;

Positioning a product for a specific niche. For example, if it is luxury, then it may not always be justifiably overpriced, if we talk about the costs of its production;

Stimulation sales;

Expansion of the share in the wound;

These are not all goals. If desired, this list can be seriously expanded. After all, all companies have their own goals at one time or another.

Pricing Methods. So, here are the main pricing methods:

1) Based on costs

This method is one of the most understandable and well-known. In this case, the price of the product is set depending on expenses for its production. Those. The cost of the product must cover the costs of producing the product and at the same time bring the organization a certain profit.

Obviously, a serious advantage in such an advantage will be gained by the one that is able to minimize its expenses. Indeed, in this case, it will be able to set lower prices for its products or receive more profit. Finally, many believe that this method is quite transparent and fair to the end consumers of products who do not pay for air.

Naturally, this method also has certain problems:

In some cases, it may be quite difficult to calculate the cost of producing a product to establish its value;

If competitors have lower costs, then the company will face serious problems;

Costs may vary. Consequently, the price of the product will also jump;

2) Keeping an eye on competitors

In this case, the price of the product is set based on the prices of competitors. One of the most popular methods is to establish the average price for the industry, when the average price of a product is calculated between the most expensive and cheapest analogues. Finally, the price can be set either higher than that of competitors or lower. It all depends on how the organization wants to position its product on market what goals it pursues.

Of course, even using this pricing method, we must not forget about costs, so that a situation does not arise when the price for a product is simply set out of thin air, while expenses will not allow it to be sold at that price. This will simply not be beneficial to the organization.

3) For product positioning purposes

In this case, the price is set so as to emphasize the advantages of the product and its positioning. For example, if the goal is to make a product expensive and position it as a luxury product, then it is necessary to set a high price. If, on the contrary, a company wants to position a product as affordable, it needs to set the lowest possible price.

4) Based on demand

Everything is logical here. If the demand for a product is off the charts, then the price can be raised. If there is no demand, then it must be omitted. Naturally, you can try to calculate all this in advance using marketing research.

You can also highlight non-main methods, such as: cost method; market method of consumer valuation; market method of following the leader; auction method; tender method; parametric method; method of specific indicators; method of structural analogy; aggregate method; point method; method of correlation and regression analysis.

Theoretical aspects of pricing management in an enterprise

Concept, types of prices and their classification. Specific pricing options largely determine the company's financial policy. Price is the object of vigorous competition, the results of which largely determine the financial results of market activity, which significantly increases the responsibility of company management for the quality of business decisions that are in one way or another directly or indirectly related to price management. As you know, price is an economic category, meaning the amount of money for which one wants to sell, and buyer ready to buy the product. The price of a certain quantity of a product is its value, hence the price is the monetary value of the product.

According to N.L. Zaitsev, price is an economic category that allows one to indirectly measure the socially necessary labor time spent on the production of a product. In commodity relations, price acts as a link between producer and consumer, that is, it is a mechanism ensuring balance between supply and demand, and, consequently, between price and value.

Price is a complex economic category. It focuses on almost all the main economic relations in society. First of all, this applies to the production and sale of goods, the formation of their value, as well as the creation, distribution and use of cash savings. Price mediates all commodity-money relations.

Pricing is the process of setting prices for goods and services. There are two main pricing systems: market pricing, operating on the basis of the interaction of demand and offers, and centralized state pricing - the formation of prices by government agencies. At the same time, within the framework of cost pricing, the basis for price formation is the costs of production and circulation.

The price system characterizes the interconnection and interrelationship of various types of prices, consists of blocks, which are considered both specific prices and certain groups of prices.

The first and most important feature of the classification of prices is their accordance with the serviced sphere of commodity circulation.

Depending on this feature, prices are divided into the following main types:

1) wholesale prices for industrial products are divided into 2 subtypes: the wholesale price of an enterprise is the price at which it sells its products to other enterprises; wholesale price industry- the price at which the enterprise pays its products to supply and sales organizations;

2) prices for construction products. Construction products are valued at three types of prices: estimated cost - the maximum amount of costs for the construction of each facility; list price - the average estimated cost of a unit of final product of a typical construction project; negotiated price - the price established under the agreement between customers and contractors;

3) purchase prices for agricultural products - prices (wholesale) at which agricultural products are sold by farmers;

4) tariffs for freight and passenger transport - fees for the movement of goods and passengers collected by transport organizations from senders of goods and the population;

5) retail prices - prices at which trading companies sell products to the public;

6) tariffs for utilities and household services provided to the population;

Prices serving foreign trade turnover (export and import prices). A similar classification of prices depending on turnover is highlighted by Sergeev I.V. in the textbook “Enterprise Economics”.

Zaitsev N.L. Depending on the nature of the serviced turnover, he distinguishes three main types of prices for industrial products.

The wholesale price of an enterprise is the price that provides for reimbursement of current costs and profit. The wholesale price of an enterprise plays an important role in the economic activity of an industrial enterprise, because provides him with reimbursement of current production costs and receipt of standard net profit.

Tsopt. prev.= Sp (1+Rcc),

where Sp is the full planned original cost units of production of the enterprise, rub.

Rсс is the level of profitability calculated at the initial cost, i.e. This is the amount of profit received from the sale of the annual volume of products per 1 ruble of annual operating expenses, which can be determined by the formula:

Rсс = (Rpr *PFсr) еСр,

where Rpr is the level of profitability of an industrial enterprise in fractions of a unit;

PFcr is the average annual cost of production assets, i.e. the amount of fixed and working capital;

Spr is the full planned initial cost of the annual volume of produced and sold products.

Wholesale price industry is formed on the basis of the wholesale price of the enterprise and the additional inclusion in the price of the item of trade, profit of sales organizations and value added tax:

Copt.ind.=Copt. prev.+(Ts.p.- MZ) *VAT+PRsb+TZsb,

where MZ is the actual or planned initial cost of material costs per unit of production;

PRsb, TZsb - and expenses of sales organizations.

The state retail price is the final price at which consumer goods and some tools and objects of labor are sold through the trading network. It represents the wholesale price of industry plus the costs of trading organizations and the size of the planned profit. It reflects the process of growth of socially necessary expenses at all successive stages of production of goods:

Tsr=Tsopt.ind.+TZr+Pr.,

where TZr, Pr. - current expenses and profits of retail trade organizations.

Depending on the scope of regulation, there are:

1) free prices that are set by producers of products and services based on supply and demand;

2) contractual prices established by agreement of the parties;

3) prices under conditions of partial or complete monopolization market, which force one or both parties to accept some kind of coercive conditions;

4) regulated prices by agreementpan> prices established under the control of states or individual subjects of the Federation. There are direct and indirect methods of regulation. Direct regulation is carried out by establishing fixed prices, maximum prices, markups, maximum price change factors, and maximum profitability levels. Indirect regulation involves influencing prices through changes taxes and interest rates.

Depending on the territory of action there are:

1) prices, uniform country or waist;

2) prices are regional (zonal, local).

Unified, or zone, prices can be set only for basic types of products, for which prices are regulated (fixed) by government agencies (rents, alloys, etc.).

Regional prices can be wholesale, purchase, or retail. They are established by enterprises, pricing bodies of regional authorities and management (prices and tariffs for the vast majority of housing, communal and personal services).

According to the method of establishing fixation, there are:

Investor Encyclopedia. 2013 .

Synonyms:

See what “Pricing” is in other dictionaries:

pricing- pricing... Spelling dictionary-reference book

pricing- The process of forming prices for goods and the price system as a whole. In a free market, the process c. occurs spontaneously, prices are formed under the influence of supply and demand in a competitive environment. … … Technical Translator's Guide

PRICING- the process of formation, formation of prices for goods and services, characterized primarily by methods, methods of setting prices in general, relating to all goods. There are two main pricing systems: market pricing based on ... ... Economic dictionary

Pricing- pricing, the process of choosing the final price depending on the cost of production, competitors' prices, the relationship between supply and demand and other factors. Basic approaches to setting prices: based on closed bidding, based on... ... Financial Dictionary

After determining and analyzing the demand function, cost structure and competitor prices, it is time to make a pricing decision. To do this, it is necessary to choose a pricing method that would take into account the above limitations to the maximum extent possible. There are three groups of pricing methods:

pricing based on own costs;

demand-oriented pricing;

competition-oriented pricing.

Having chosen and applied one of the pricing methods, it is necessary to make a pricing decision, i.e. set a specific price. Here it is necessary to take into account such aspects as psychological impact, the influence of other elements of the marketing mix, check compliance with the original goals of the pricing policy, and also identify various e types of reactions to the accepted price.

Pricing Methods

Costly methods.

There are several cost-based methods that determine the price based on the “cost plus profit” principle.

1. Cost method taking into account the full (or average) costs of production, it is based on determining the full cost, which includes both variable and fixed costs. The essence of the method is to sum up total costs: variable (or direct) plus fixed (or overhead), and the profit that the company expects to receive.

The main advantage of this method is its simplicity and convenience. This is due to the fact that the manufacturer always has data on its own costs. However, it has two big drawbacks:

1) when setting prices, the existing demand for the product and competition in the market are not taken into account, so a situation is possible when the product at a given price will not be in demand;

2) any method of attributing fixed overhead costs to the cost price of a product, which are the costs of managing an enterprise, and not the costs of producing a given product, is conditional.

2. Direct (or marginal) cost method is based on setting prices by adding a certain premium - profit - to variable costs. At the same time, fixed costs as expenses of the enterprise as a whole are not distributed among individual goods, but are repaid from the difference between the sum of sales prices and the variable costs of production. This difference is called “added” or “marginal” profit. With the right approach, variable (direct) costs should be the limit below which no manufacturer will price their products. In any case, the true function of cost is to set a lower limit to the initial price of a good, while the value of that good to the consumer determines the upper limit to its price.

Selling a product at a price calculated using this method is effective at the saturation stage, when there is no sales growth and the company wants to maintain sales volume at a certain level.

3. The method of calculating prices based on break-even analysis and ensuring target profit is based on the fact that the enterprise seeks to set the price for its product at a level that would ensure the desired amount of profit. The break-even point is the intersection point of the total revenue curve and the total cost curve. At the break-even point, the profit volume is zero. The main disadvantage of the method of determining price based on break-even analysis is that the relationship between the price of the product and actual demand is not taken into account.

4. Method of setting price based on return on investment analysis. The main objective of this method is to estimate the total costs of various production programs for goods and determine the volume of output, the sale of which at a certain price will recoup the corresponding capital investments. The established premium to production costs includes a percentage of return on invested capital.

5. Structural analogy method. The essence of this method is that when setting the price of a new product, the structural price formula is determined based on its analogue. To do this, use actual or statistical data on the share of basic elements in the price or cost of a similar product. If it is possible to accurately determine one of the price elements for a new product, for example, material costs, consumption rates, etc., then by transferring the structure of an analogue to a new product, an estimated price can be calculated.

In domestic practice, cost methods are used when setting prices for:

Fundamentally new products, when it is impossible to compare them with manufactured products and the amount of demand is not sufficiently known;

Products manufactured according to one-time orders with individual production features (construction, design work, prototypes);

Goods and services for which demand is limited by the solvency of the population (repair services, essential products).

Demand oriented.

In this case, prices are determined on the basis of marketing estimates, i.e. based on market research.

Almost all enterprises, when setting the price for their products, take into account the demand factor in one way or another, since if the price exceeds the level that consumers agree to, the product simply will not be sold. Therefore, this method is often used in conjunction with other pricing methods or, in the case of a unique product, can be used independently in the first place.

This method makes it possible to implement a high price strategy (premium pricing or “cream skimming”), which is used by the company, as a rule, under the following conditions:

There is very high and increasing current demand from a fairly large number of buyers;

Production costs make it possible to maintain efficient production output, and financial results contribute to increasing the production of a new product and its supply on the market;

A high initial price will not attract new competitors to the production of goods;

The high price corresponds to high quality and does not interfere with attracting new customers.

Using this method requires a lot of work to study the market, demand, elasticity; the company must have the financial capabilities and specialists for expensive research. The method is closely related to the differentiation of one's product and the differentiation or segmentation of the market.

When studying potential demand, research is carried out to identify:

Ideas about price and “price range” for most buyers;

Reactions to price changes (elasticity) by asking questions about the possibility of purchasing at different prices;

Possibility and necessity of price differentiation in accordance with purchase costs, solvency, demographic, psychological and other characteristics of buyers.

The disadvantage of this method is that the information is distorted due to the absence of the moment of purchase as a fact.

Test sales may also be carried out. In this case, after determining an acceptable price range, it is varied based on monitoring consumer reactions to optimize the revenue-sales volume combination.

Auction prices for unique or prestigious items are also examples of demand-driven pricing.

Focus on competitors.

If the price determined on the basis of production costs is, as a rule, the lower calculated level, and the price determined on the basis of demand is the upper level, then the designated range is the so-called playing field, where the expected price will most often be located.

Typically, a company is forced to build its policy taking into account the existence of competitors; it tends to be aware of its competitors' price-setting practices.

One of the methods of pricing in this case may be targeting competitors. If there is a clear leader in the market, then the rest will follow him. Moreover, price leadership can be dominant when there is a company in the industry that has low costs, and therefore clear price advantages over others. Or there may be barometric leadership, when the company’s price changes are supported by other producers who recognize the leader’s ability to set prices in full accordance with changing market conditions.

With this method, the manufacturer is guided by the competitor’s prices, and taking into account its own costs and demand plays a subordinate role here. The manufacturer sets the price of the product slightly higher or slightly lower than that of its closest competitor. This is only possible in a market with homogeneous products. By relying on this method, the company gets rid of the risk associated with setting its own price in the sense of its acceptance by the market.

In addition, in conditions of strong competition, a firm has little chance of influencing market prices. At the same time, in a pure oligopoly, an enterprise has the practical opportunity to maintain its price for a long period.

Another method of determining price within a specified range between the minimum and maximum is active pricing, which involves leveraging the firm's competitive advantages, such as cost leadership and product differentiation.

Cost leadership allows a manufacturer to set a lower price for its product than its competitors and still make a profit.

This can be achieved by saving:

On the range of products due to the inclusion in the company’s “portfolio” of goods that have a common set of costs: the more costs that are common to the goods, the greater the synergy obtained from expanding the “portfolio”;

Due to the scale of production: there is a tendency for costs to decrease as production volumes increase;

Through the accumulated experience associated with learning by doing: the more a company produces, the more it learns about how to make production efficient.

Product differentiation occurs when a firm produces a product that differs from competitors' products in some way that is attractive to customers. As a result, the firm has the right to increase the price depending on the presence of such distinctive features, and the price premium must exceed the costs incurred in connection with imparting the distinctive features to the product. Both the consumer properties of the product itself and the after-sales service can be unique.

Many products are sold at established standard prices, while their quality exceeds consumer expectations. In this case, the main competition revolves around the functionality of products sold at one standard price. This situation is characterized as flexible competition. In this situation, the advantage goes to the company that is able to provide the best consumer properties of the product at a given standard price. The most important factor in flexible competition is a company's ability to innovate quickly.

In fact, the prices of different companies producing similar products may vary significantly. There are several reasons to explain these discrepancies. One of them is different production technologies. Some companies' production facilities are better suited to fulfill a given order, resulting in cost benefits for the companies. Another reason may be the degree of loading with orders at the time the price is set. Firms that are not fully loaded can set reasonable prices, hoping to receive additional orders.

Another reason for large price discrepancies is different cost accounting and pricing methods. Many companies use valuation methods that do not reflect the actual level of their costs. Traditional cost accounting methods distort reality in many cases and in some situations can cause serious problems if prices are set on their basis. In large-scale production and in the manufacture of relatively simple products, traditional cost accounting methods lead to overestimation of costs, while for small-scale and technically complex products costs are inflated. Thus, companies have no idea about the real profitability of certain products or sales.

Consequently, any company that implements more accurate cost accounting methods, such as by activity, will gain a competitive advantage.

Unless a company has become a cost leader, it must know its true costs in order to compete on price.

The use of methods focused on demand and competition will give similar results if the enterprise enters the market with a product already available on it in the absence of price collusion among competitors (the selling price of the product corresponds to the demand price and is not imposed on the market).

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To effectively manage a company, you need to know how the price of a product or service is formed, that is, the basics of pricing methods. Analysis of real prices allows the manager to decide whether it is necessary to increase production capacity or to reduce production volume, in which direction to work, and what to invest in so as not to be left without profit. If an organization has the right pricing policy, it will be able to achieve its desired goals. Below are the main pricing methods, the use of which will help a business become more successful.

Traditional Pricing Methods

Pricing is a process during which the cost of products and services is determined. There are different pricing systems.

Determining the cost of a product or service is preceded by the following steps:

detection of factors beyond the control of the company that can affect the price of a product;

determining the purpose for which the price of a product or service is calculated;

choice of cost formation method;

developing a strategy by which the price will be determined;

implementation of market value adjustments.

The following price formation systems are distinguished:

Market pricing is based on an analysis of the balance of supply and demand.

Centralized government pricing. The use of this system assumes that the cost of goods is determined by the state and depends on the costs of production and sales of products.

The issue of pricing should be approached wisely. The cost of goods must be such that the company can:

occupy the desired market share;

be profitable;

achieve all your goals.

It should be noted that the price cannot be fixed - it must be varied as the market situation changes.

In order to set the price of a product, the various mechanisms used must form a single integrated system of pricing methods:

interdependence of prices for products of one product group;

development of a discount system;

periodic price changes;

establishing the cost of products taking into account prices for analogues produced by competing enterprises;

setting prices for new types of products.

In our country, the cost of the same goods sold in different regions varies greatly. As a rule, prices for goods are higher in the Far Eastern Federal District and the Far North.

The essence of pricing methods lies in the sequential passage of the following stages:

1. Identifying the purpose of determining the cost. Here you need to find out what the company wants to achieve by setting a certain price for the product.

The objectives of the organization may be:

growth in sales volumes;

gaining and maintaining reputation;

strengthening its position in the market;

gaining consumer trust, expanding the customer base, etc.

2. At the second stage, you need to estimate demand by finding out how elastic the prices for a product are (that is, what will be the demand for them when certain prices are set).

3. Determination of production costs and ways to reduce them. The enterprise will receive more profit and develop if the price of the product is maximum and the costs of its production are minimum. The use of “economies of scale” is promising. It involves the creation of conditions conducive to reducing production costs while increasing production capacity.

4. Studying the range of goods supplied to the market by competitors and their prices. The purpose of this stage is to determine the “price of indifference.” This is the price at which a buyer can buy a product from any manufacturer with equal probability. To persuade him to purchase its products, the company can:

reduce the price of a product;

improve its quality;

create more convenient payment conditions for consumers;

improve the quality of service.

What other methods of pricing products are there?

The success of production activities depends on many factors. The main ones include pricing policy. By regulating the cost, you can make a profit, ensure the production of highly competitive goods, and increase demand for them. Prices are an indicator that reflects the results of the work of all departments of the organization, through which enterprises can realize their commercial goals.

When setting prices, you should remember that the company must be profitable. If the required percentage of profitability is not included in the cost of goods, then the profit of the enterprise will gradually decrease. This can lead to a decrease in production volumes and a deterioration in the financial condition of the company. However, in some cases, to increase competitiveness, you can set low prices using the necessary pricing method, but the company will not make a profit. This will help conquer the target market segment and oust competitors from it.

It happens that an organization deliberately reduces prices for its products, which entails a decrease in profits. However, this helps it expand its sales market, and losses are compensated in the future by increasing demand and sales volumes.

It is quite difficult to regulate the cost, since it depends on the cost of raw materials and materials used for the manufacture of products, the cost of paying workers, the consumption of water, electricity, and other resources during production. In addition, it is impossible to endlessly reduce the material intensity of products. Unlike the cost price, the price for a product can be set by an enterprise at any price.

But here you need to understand that if the price of a product is unreasonably high, the buyer will not purchase it and will prefer a cheaper similar product from a competitor. Therefore, the goal of the pricing policy should be to establish the maximum cost while maintaining sales volumes or even increasing them.

The organization makes a profit due to such a marketing element as price - only it provides income to the company. The price of a product on the market cannot be established without taking into account various factors. It depends, for example, on how many competitors are operating in the market and on the general state of the economy. These factors are also elements of traditional marketing and are subject to change.

One of the tasks of the value formation strategy is to determine the price level and their upper and lower limits for various categories of goods. To set the price correctly, it is necessary to take into account which group the product belongs to, whether it is useful, what its quality is, and how significant it is for buyers. It is also necessary to assess the purchasing power of the population, analyze prices for similar products from competing enterprises and for substitute products.

Managing pricing means developing a set of measures to maintain established prices and regulate them, guided by the results of demand analysis, the cost of similar goods, and the level of competition.

The pricing strategy is built in several stages:

1. Study of prices, which involves elaboration of the following questions:

determination of price standards;

compilation and analysis of buyer characteristics;

validity of price differentiation;

taking into account the prerequisites for fluctuations in the cost of goods;

the relationship between price standards and other elements of marketing;

elasticity of demand;

reaction of competitors to the cost of the product;

correspondence of the price of the product to its image;

product life cycle and its impact on price formation;

development of a discount system;

differentiation of cost depending on the territory in which the product is sold, target market segment, season, etc.;

tasks of pricing strategy.

2. Determining the goal on the basis of which the price will be set:

pricing is necessary to extract benefits, maintain price levels, and successfully compete with other companies;

The areas of cost formation include the price level, their regulation, and the system of discounts.

3. Selecting the most appropriate pricing strategy.

Price formation is carried out in several stages:

first, a base price is established, which does not take into account discounts, markups, transportation costs, insurance costs, and maintenance;

determine the price, including the components listed above.

What pricing methods are there? The base cost is calculated using the diagrams below. Moreover, they can be used not only separately, but also combined.

1. Full cost method, or cost plus method(Full Cost Pricing, Target Pricing, Cost Plus Pricing). To determine the price, the production costs of the product are first calculated. Then the resulting amount is increased by the profit rate. The increase in cost must be such that the enterprise can sell goods and make a profit. As a rule, the cost also includes the costs of paying indirect taxes and customs duties. This method is used by organizations that have a clear differentiation of goods. In this way, the price of products produced for the first time, as well as those that are not competitive, is formed.

For example, a company produces household items and launches production of a new product. She needs to put a price on it. It is expected that 10,000 such products will be produced per year. At the same time, 1,000 rubles will be needed to purchase the necessary raw materials and materials, and 400 rubles will be needed to pay workers (for one unit of goods). According to the plan, fixed costs will be 2,000,000 rubles per year, and revenue will be 4,000,000 rubles.

Let's determine the cost of the product using the marginal cost method.

Let's calculate what profit is planned to be received from sales after variable costs are reimbursed: 2,000,000 + 4,000,000 = 6,000,000 rubles.

Desired revenue from the sale of one product: 6,000,000 / 10,000 = 600 rubles.

The cost of producing one unit of goods will be: 400 + 1,000 = 1,400 rubles.

The cost of production is determined as the sum of total costs and the desired profit after their reimbursement (per unit of goods): 600 + 1400 = 2,000 rubles.

2. Manufacturing cost method(Conversion Cost Pricing). To determine the price, an amount is added to the cost of purchasing the necessary raw materials, materials, and semi-finished products that corresponds to the company’s contribution to the increase in price. This method is not used to set prices for a long period of time; it cannot replace the full cost method, being only its addition. Below are cases of its application:

if the company plans to increase profits while increasing production volumes;

if a decision is made to continue competition with other manufacturers;

if, when assessing the profitability of certain categories of goods, the assortment policy changes;

3. Marginal cost method(Direct Costing System). When setting a price, the value of variable costs increases by an amount that can compensate them and ensure the receipt of the planned profit. Using this method allows you to fully cover fixed costs and increase revenue.

4. ROI method(Return on Investment Pricing). It assumes that when determining the price, profitability should be ensured above the cost of funds attracted from outside. The amount of interest on the loan is added to the total cost of producing a unit of output. This method takes into account the payment of financial resources. It can be used by organizations that produce a large number of items of goods, the production costs of which are different. This is how the cost of new products is calculated. The return on investment method can be used to determine the production volume of new products.

For example, a company needs to calculate the price of a new product. It is planned to produce 40,000 products annually, variable costs per unit will be 35 rubles. The amount of fixed expenses will be 700,000 rubles. In this case, the company will need borrowed funds (1,000,000 rubles), which it can borrow at 17% per annum.

Let's determine the unit price using the return on investment method.

Let's calculate the fixed costs per unit of product: 700,000 / 40,000 = 17.5 rubles.

Total expenses will be: 35 + 17.5 = 52.5 rubles.

Desired revenue: (1,000,000 × 0.17) / 40,000 = 4.25 rubles/unit. (not lower).

The minimum price may be as follows: 35 + 17.5 + 4.25 = 56.75 rubles.

5. Methods of marketing assessments(Pricing based on Market Considerations). These are pricing methods aimed at determining the cost of a product at which consumers will definitely purchase it. In this case, the main goal of the company is to increase competitiveness, and profit and the need to cover production costs are relegated to the background.

For marketing pricing methods, example calculations are given below.

Demand depends on the cost of the product; its elasticity is 1.75.

Let's find out how a decrease in price by 1 ruble will affect demand. The sales volume before the price change was 10,000 products at 17.5 rubles. The total cost is 100,000 rubles (variable costs are 80,000 rubles).

Sales proceeds amounted to: 17.5 × 10,000 = 175,000 rubles.

Profit received before cost reduction: 175,000 – 100,000 = 75,000 rubles.

After the price is reduced, sales volume will increase: 10,000 × (1.75 × 1/17.5) + 10,000 = 11,000 units.

In this case, the revenue will be: 16.5 × 11,000 = 181,500 rubles.

Production and sales costs after the cost change will be:

constant: 100,000 – 80,000 = 20,000 rubles;

variables: (80,000 / 10,000) × 11,000 = 88,000 rubles.

total costs: 20,000 + 88,000 = 108,000 rubles.

The amount of profit after the change in value: 181,500 – 108,000 = 73,500 rubles.

From the calculations it is clear that a decrease in the price of a unit of goods by 1 ruble will lead to a decrease in profit by 1,500 rubles: 75,000 – 73,500 = 1,500 rubles.

Let's calculate how a decrease in the cost of a product by 1 ruble will affect the profit level if fixed costs are 50% of the total.

The costs after the price change will be as follows:

constant: 100,000 × 0.50 = 50,000 rubles;

variables: ((100,000 – 50,000) / 10,000) × 11,000 = 55,000 rubles;

total costs: 50,000 + 55,000 = 105,000 rubles.

Let's determine the profit from selling goods at a reduced price: 181,500 – 105,000 = 76,500 rubles.

Based on these calculations, we can conclude that in this case, the decrease in cost led to an increase in profit by 1,500 rubles: 76,500 – 75,000 = 1,500 rubles.

What are the features of service pricing methods?

Services are fundamentally different from goods. This is due to:

their immateriality (intangibility);

the fact that they are consumed individually;

impossibility of storing them;

close connection between production and consumption of services;

inability to ensure stable quality;

the importance of not only the result, but also the process of providing services.

The cost of services is mainly influenced by supply and demand. Also, the price will depend on how significant these services are for the population. Therefore, market pricing methods cannot always be used to calculate the cost of services. It is necessary to provide benefits, subsidies and consumer subsidies (for example, for services offered by medical institutions, educational ones).

It should be borne in mind that some services are socially significant and vital for citizens, so they should be provided both on a paid and free basis. Price discrimination should not be allowed to occur.

Market conditions have a great influence on the service sector, therefore, the methodology for calculating prices must be flexible. Sometimes it is necessary to differentiate the cost of the same service depending on the need for it (for example, at different times of the day). It is recommended to provide discounts to ensure a stable income, especially if demand is uneven.

It should be remembered that the demand for services is elastic in price and income, and take this into account when calculating the cost.

As a rule, consumers do not always have reliable information about the quality of services provided by a particular organization and, in their choice, are guided by their cost. This should also be taken into account in the pricing process.

The cost of services is wholesale, but also performs retail functions.

The cost of services can be calculated:

per unit of service provided (ticket to a museum, art gallery);

for a set of works, the implementation of which is necessary to provide the service (for example, the services of a cosmetology salon);

for several complementary services (tour operator services);

for the right to use them for a certain period of time (for example, a subscription to a swimming pool).

The cost of services can be set arbitrarily, but in some cases it is regulated (if there is a natural monopoly in the market). In addition, prices can be fixed, flexible or change depending on the season. Discount systems are also being developed.

The price structure for different services is different. Their cost can consist only of total costs and profit margins (for example, payment of utilities), and may also include tax fees (tourism services).

Selecting a Pricing Method

The most commonly used methods for pricing goods are:

a costly pricing method - it is used if there is no competition and the manufacturer is sure that there will be no enterprises producing a similar product;

“following the leader” - this method is used, as a rule, by small companies;

marketing research – pricing methods in marketing must take into account the marketing strategy adopted by the company.

To finally determine the price, it is necessary to take into account inflation expectations and the impact of possible changes in market conditions. It is also necessary to develop rules for changing the cost of goods in the future, and a system for providing discounts.

It is necessary to begin calculating costs by analyzing pricing methods and choosing the most appropriate one, taking into account the position the company occupies in the market and what its strategy is.

Cost-based pricing methods in an enterprise should be used:

if products are produced according to individual orders or individually;

if the demand for products is very small due to the low purchasing power of citizens.

Today, many organizations take costs as the basis for calculating costs. Cost-based pricing methods involve pricing based on the cost of producing a product and the amount of desired profit.

These pricing methods can be used when you need to determine a reference price. The final cost is calculated taking into account changes in the market.

Using cost + profit pricing methods allows you to set the initial price for a product.

When calculating prices this way, you should first calculate the base costs. They represent a combination of fixed and variable costs.

Pricing methods include the following:

Cost-based pricing method taking into account full costs

Implementation costs, as well as administrative ones, are not considered basic; they are included in the premium, which must be set so that it can cover all costs.

The advantage of this method of calculating cost is its simplicity. In addition, the manufacturer will always know the cost of production and sales of products. In this case, he can be sure that they will be reimbursed in full. But there are also disadvantages of the full cost pricing method:

supply and demand are not taken into account - this can lead to the product being unclaimed;

If the price of products is regulated by the state, then it will not be possible to reduce the costs of producing goods.

Pricing using the direct cost method

The initial cost is calculated taking into account only variable costs and markups.

Fixed costs are covered from profits. To provide this opportunity, the price is increased by an amount called added value.

This pricing method, in which costs and profits are the basis for calculations, is usually used by firms that do not need to increase sales volumes and their goal is to maintain the same level.

Pricing based on break-even analysis data

In this case, you need to start from the break-even point. In it, the costs of production and sales of products over the entire period are equal to the amount of profit from sales.

This method is used if there is a need for additional investments in production.

Direct pricing method

Combines cost and market methods of pricing products.

The advantage of this method is that the manufacturer focuses on demand when setting prices.

In addition, when calculating the price, the cost of similar products from other manufacturers is also taken into account.

following the leader;

monitoring the reaction of competing enterprises;

tender formation of prices for products.

A manufacturer focuses on industry leaders if it strives for its product to be on the same level with their products on the market.

It is necessary to pay attention to the pricing policies of competing companies if their influence on the market is increasing and they show interest in it.

Transfer pricing method

Transfer pricing methods presuppose the existence of an organization that sells goods and services to connected persons, while the amount of tax payments is reduced.

As a rule, these organizations are led by one person, or they have friendly relations.

The price of the product is reduced, so the amount of taxes paid is reduced. The use of such a scheme is a sign of unfair competition.

The most common pricing errors:

emphasis only on the costs of producing goods;

unwillingness to promptly change prices in response to changes in market conditions;

lack of pronounced differentiation of product costs by market segments.

Making such mistakes when determining prices can cause a decrease in profits, losses, or even the ruin of the company.

The most effective pricing methods (price setting methods) are those that take into account the results of marketing research. They allow you to obtain information about the volume of the Russian market, its participants and their shares, the main consumers of the product, as well as an analysis of its development trends, including forecasts for several years. But we do not recommend that you do marketing analysis yourself, since this is not an easy process, requiring the processing of a large amount of information, and you (as a non-professional in this matter) may miss important data.

Therefore, it is worth turning to professionals. Information and analytical company "VVS" is one of those that stood at the origins of the business of processing and adapting market statistics collected by federal departments. The company has 19 years of experience in providing product market statistics as information for strategic decisions, identifying market demand. Main client categories: exporters, importers, manufacturers, participants in commodity markets and B2B services business.

commercial vehicles and special equipment;

glass industry;

chemical and petrochemical industry;

building materials;

medical equipment;

food industry;

production of animal feed;

electrical engineering and others.

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There is a whole system of methods for determining prices. Firms view price as a variable and important factor, so they are very careful when setting it. When choosing a price determination method, the following considerations are usually taken into account: If you set the price too high, demand will be limited. If you set the price too low, there will be little or no profit. The possible price is determined by the cost of production, the prices of competing and substitute goods, and the unique advantages of the product compared to other goods. The maximum price is determined by the unique advantages of the product, the minimum by production costs, the average by competition.

The system of pricing methods includes the following methods:

• * based on production costs;
• * orientation towards the value of the product;
• * focus on competition;
• * based on finding a balance between production costs and market conditions;
• * parametric methods; method of statistical games.

Determining prices based on production costs

The essence of this method of calculating prices is as follows: the manufacturer of the product determines production costs and adds to them the desired amount of profit, which he considers as a reward for the invested capital. Wholesalers and retailers, when determining their prices, base their prices on the costs associated with the purchase of goods (wholesalers - from the manufacturer, retailers - from wholesalers or directly from the manufacturer), and markups (wholesale, retail), which are set by sellers at their discretion (unless, of course, markups are regulated by the state) and must ensure that the costs associated with their activities and obtaining the desired profit are covered. The size of markups depends on many factors: the nature of the product, the size of its sales, the position of sellers in the market, the prevailing markups in the market, the desires of sellers, and government intervention in pricing.

Determination of prices based on production costs is carried out on the basis of total and variable costs. When calculating prices based on full production costs, both variable and fixed costs are taken into account. When calculating prices based on variable costs, fixed costs are not taken into account. Profit in this case is added to variable costs.

Let us recall that variable costs are costs that are directly related to the manufacture of a product (their total amount directly depends on changes in production volume), but which practically do not change per unit of product. Fixed costs under existing production conditions do not depend on production volumes. It is very difficult to correctly calculate the amount of production costs and divide them into variable and fixed. At the same time, this is very important for making decisions on price levels, analyzing the profitability of the enterprise, and making other decisions by the company.

The cost-based pricing method involves determining prices based on a break-even schedule. In this case, the company takes into account market factors: current market prices for similar products, possible production and sales volumes at different prices. The firm is looking for a price and corresponding volume of production that would ensure that it receives the target (desired) amount of profit. Cost-based pricing also includes a method of setting prices in accordance with the “absorption curve”. The company turns to this method in cases where it decides to reduce the current price. In this case, price reductions follow a reduction in costs. The firm makes either selective price reductions in order to expand the market, or sharp price reductions if there is a threat of competition or if cost recovery will be guaranteed by rapid growth in sales volume.

The method of justifying prices based on production costs has the following disadvantages.

• * The price may be higher or lower than the price that buyers are willing to pay for a given product, since the factors of demand for the product are not taken into account when justifying the price.
• * Manufacturers ignore the fact that the price may not be directly dependent on production costs, which may be changed in order to satisfy the market.
• * Manufacturers often build prices not on the basis of variables, but on the basis of total production costs, not on the basis of expected, but on the basis of current costs. Building prices based on variable production costs allows producers to expand sales volumes (due to a lower price level). Using expected costs instead of current costs is legal not only during inflation, but also when entering the market with a new product. When entering a wide market with a new product, as a rule, hidden costs are revealed, which do not manifest themselves during the sale of a trial batch. Pricing based on current costs can put the manufacturer in a difficult position.
• * Manufacturers ignore the issue of market segmentation and buyer attitudes towards price.
• * With cost-based pricing, manufacturers are not very interested in developing new products, citing the need to reimburse the costs of research and development and bringing the product to market at the initial stage.
• * Manufacturers do not use price as an effective commercial tool and thereby limit their freedom of action.
• * The method of justifying prices based on production costs is more suitable for determining the lower price limit (which should answer the question: can or cannot enter the market with a new product, stop or continue the production of an old product) than for determining the selling price.

Setting prices based on production costs is considered by many economists to be an outdated and ineffective pricing strategy, although often practiced.

The cost-based pricing method is used by monopolies, large oligopolies, and small sellers.

The popularity of the cost-based pricing method is due to a number of reasons. This method is simple. Information about production costs is more readily available than information about demand. It is believed that if all firms in the industry use this method of determining prices, then their prices will be similar, and in this case price competition is minimized. In addition, many consider the average cost plus profit method of calculating prices to be fairer to both buyers and sellers. When demand is high, sellers do not profit at the expense of buyers, and at the same time it is possible to receive a fair rate of return on the invested capital.

Determining prices based on the value of the product

This method of determining prices is based on the consumer-perceived value of the product and the buyer’s desire to pay a certain amount for this value. The price in this case should correspond to the perceived value of the product by the consumer. A firm can set a high price for its product when the product is of great value to the buyer and when he is willing to pay for it above the normal market price. As the perceived value of a product decreases, the price decreases. In both cases, production costs may be the same. With this approach to determining prices, production costs are considered only as a limiting factor that shows whether the product at the price calculated by this method can bring the profit planned by the company or not.

The value calculated by the method under consideration is based on the subjective assessment by buyers of the value of the product for them. This assessment depends on many parameters, for example, on the return received by the consumer from using the product, on the psychological benefits, on the level of after-sales service, etc.

To determine the price of its product, a company needs to identify what value ideas customers have about competing products. This can be done based on a customer survey. But you can do the following. It is necessary to determine the existing relationship between prices and consumer properties, but similar to goods available on the market, to identify how much the company’s product is better or worse than these goods, and based on the obtained relationships, set the price for your product. Such actions of a company seeking a price for its product reflect the logic of consumer behavior.

Profits are very price sensitive, so making a final price decision based solely on a survey is dangerous for the firm. Surveys cannot replace a serious analysis of product properties and market situations. But this does not mean that there is no need to contact consumers to determine their opinion about the product and how much they are willing to pay for it. Large firms collect such information and use it to determine broad price targets.

The method of determining price based on the consumer's perceived value of a product can be successfully used when there are interchangeable goods on the market, which allows the buyer to compare products and choose those that best meet their desires.

The presence of a wide range of interchangeable goods on the market depends largely on the ability of firms to differentiate their products, that is, to give the same type of product different properties that correspond to the desires of consumers and bring them tangible benefits. Product differentiation can be done on the basis of technical properties, packaging, design, taste, etc.

Closely related to product differentiation is the issue of market differentiation. Market differentiation is based on the proposition that the company does not work with a homogeneous market of buyers who are looking for the same product with the same properties, but with several of its segments, each of which evaluates the individual consumer properties of the product differently. When there are differentiated products, firms use a range of prices rather than a single price.

Competition-oriented pricing

When focusing on this method of determining prices, a company proceeds exclusively from the level of current prices of competing goods and pays less attention to its own production costs and demand. It sets the price for its product a little higher, or a little lower, or at the price level of its main competitors. The pricing logic here is as follows: my closest competitor sells onions for 4 rubles. for 1 kg, my onion is the same, so I will evaluate my products the same way and set a price of 4 rubles. for 1 kg. If a company’s onion differs in terms of quality from a competitor’s product, then it will set a price a little higher or a little lower. This pricing method is used by firms whose products belong to a purely competitive market (with some assumption many agricultural products can be included here) or to an oligopolistic market (steel, aluminum, paper, cars, computers, etc.).

This pricing method is used by those firms that find it difficult to accurately determine production costs per unit of production and consider the average prices formed in the industry to be a good basis for determining prices for their goods. By relying on this method, the company gets rid of the risk associated with setting its own price, which the market may not accept.

With this approach to pricing, a firm typically does not change its prices due to changes in its production costs or demand.

It maintains its prices while its competitors maintain their prices. When competitors change prices, the firm also changes its prices, although its own costs of production and level of demand remain unchanged.

In an oligopolistic market, which presupposes the presence of several large firms, one or two firms act as leaders in setting prices. Other sellers follow them when it comes to price.

Leadership in setting prices is most likely if:

• * the market is offered a unique, new or modified product;
• * market conditions change quickly; the products have reached the maturity stage;
• * production costs have changed significantly;
• * there are opportunities to attract new customers.

Pricing based on competition includes the “sealed envelope” method, or tender pricing. This method is used in cases where several firms compete with each other for a contract. This most often happens when firms participate in tenders announced by the government.

A tender is a written statement of a price by a firm, which it determines based primarily on the prices that it believes competitors will charge, rather than on the value of its production costs or the level of demand for the product. The company's goal is to obtain an order, so its price should be lower than the prices offered by competitors. If a company finds it difficult to determine competitors' prices, it proceeds in this case from information about their production costs. Sometimes a firm offers a price below its costs in order to increase the likelihood of receiving an order.

The prices offered by firms are in sealed envelopes, which are opened at the auction. The order will be received by the company whose price is lower than all the others.

Determining prices based on finding a balance between production costs and market conditions

This method consists of several stages.

First stage. Setting pricing goals. The company must formulate for itself the goal that it wants to achieve with the help of this product and its price in the short and long term. The clearer the goal, the easier it is to determine the price. Based on the goal set, the price is calculated.

Second stage. Determining the initial project of product sales volume. The sales volume of a product is determined based on the production capacity of the company and the market capacity (which is determined based on market research).

Third stage. Calculation of the initial price based on production costs. The company calculates the total costs associated with the production and sale of the volume of products adopted at the previous stage. Total costs are divided into variable and fixed. Costs and unit prices are then calculated.

Fourth stage. Studying various (possible in the real market) sales volumes of goods and/or choosing the optimal one. Taking into account the price elasticity of demand, from all possible options for product sales volumes and prices, the “price-sales volume” combination is selected that ensures the company receives the greatest marginal profit. Contribution margin equals profit plus fixed costs or the difference between total revenue and variable costs.

Fifth stage. Assessing the position of a product on the market. Based on a comparison of technical and economic parameters, the company identifies the advantages and disadvantages of its product compared to competing products. Here it is determined how the price level, calculated on the basis of costs (see stage 3), fits into the system of current market prices for similar competing goods.

Sixth stage. Elaboration of various options “price-sales volume” taking into account competitive factors identified at the 5th stage. Based on various options “price-sales volume”, developed taking into account the information obtained at the 5th stage, the company selects the option that ensures it receives the maximum possible marginal profit. Quantitative analysis is necessarily complemented by qualitative analysis.

Seventh stage. Taking into account additional factors when setting the final price. There are a number of considerations that need to be taken into account when deciding on the final price level. We must remember that buyers consider price as an indicator of quality, and that each buyer is within a “price limit” determined by him. It is necessary to provide for the reaction of sellers (wholesale, retail) and competitors to the expected price level. It is necessary to take into account the requirements of state legislation in the field of pricing, take into account inflation if it is significant; see what the advertisement will be like; whether the firm will operate in one or more market segments.