Principles of Marketing - Philip Kotler

The choice of pricing method

Knowing the demand schedule, the estimated costs and prices of competitors, the company is ready for the selection of the price of their own goods. This price will be somewhere in between is too low, not providing profits and too high, preventing the formation of demand. Fig. 63 summarizes the three major considerations that govern the appointment of prices. The minimum possible price determined by the cost of production, the maximum - the presence of some unique advantages to the company's product. Prices of competitors' products and substitute products provide the average level, which is firm and should be followed in the pricing.

Companies solve the pricing problem, choosing a method of price calculation, which takes into account at least one of these three reasons. The company hopes that the chosen method will correctly calculate the specific price. We are with you, consider the following pricing methods: "average costs plus profit"; break-even analysis, and ensure profit target; setting prices based on perceived value; setting prices on the basis of the level of current prices; the establishment on the basis of sealed bid prices.