Any company before launching products on the market must determine the price of the product. The profit of the company and its success in the market depend on this. Several factors influence the determination of the best price.
How to determine the price level
The price of a product is affected by internal and external constraints. The internal costs and profits of the enterprise can be attributed, and the external ones - the purchasing power, as well as the prices of competitors for similar goods.
The marketer must follow a series of steps in determining the price of a product. It should be borne in mind that not every organization can independently set a price for a product. The thing is that any company that produces a product has many competitors on the market. If an organization does not have market power, it must accept the market price for the product.
It is not only the financial strength of an organization that influences the pricing of a product. The features of the product itself are of great importance. Also, the price is influenced by the manufacturer's own goals. The price calculation method can be any. When choosing the right one, it is imperative to take into account the stage of the product's life cycle, the degree of its novelty. The lowest possible price can be determined by taking into account the cost of production. But the maximum price depends on whether the product has any unique qualities.
The average price level characterizes the cost of substitute goods, as well as the prices for the goods of competing firms. When determining the level of favorable prices, it is necessary to take into account the objectives of pricing. The amount of demand should also be taken into account. When it is large, the price can be raised. With little demand, sales can increase the price cut. The marketer must assess the price elasticity of demand and only then make a decision.
Estimation of production costs is of great importance. A marketer in his work needs to take into account fixed, gross and variable costs. The price of a product is set by the marketing department at such a level that not only all production costs are covered, but also a profit.
Analysis of the products of competing firms
Before setting the price level, the marketer needs to study the goods that are produced by competing firms. Prices on the market should be taken into account. Such analysis allows a company to determine the position of its product in relation to competing products. After comparison, the marketer decides which price to choose - to set a lower or higher price.
In addition, it is important to make a prediction of how competing companies might react to the appearance of a new product in stores. Only after this preliminary analysis can you choose a pricing method and start calculating the original price.
When determining the price level, it is worth taking into account not only competitors and intermediaries, but also the state. After the price is finally approved, it must be recorded in the documents.
