Among all the economic instruments, it is the price that is an extremely attractive means that allows the manufacturer to influence the buyer. Price not only affects the number of sales, but can also decrease or increase the profit of the enterprise.
Price formation mechanism
In trade, pricing is one of the primary tasks in the activities of employees, whose competence includes the sphere of strategic development and ensuring the interests of the enterprise. This process is based not only on the prices of competitors and distribution costs, but also includes the structure and composition of prices, the rate of return and other concepts.
To establish a certain price for a product, an enterprise must take into account the variety of factors that affect it. The mechanism of pricing is based on various patterns, provides for a variety of methods and principles of pricing, including control, validity, purposefulness and continuity. All methods and principles underlying the pricing mechanism are determined by the pricing policy that is inherent in a particular enterprise. It is expressed in various techniques for creating price indicators and managing prices. These techniques are based on the knowledge of human psychology, and they include various bonuses, gifts, discounts, promotions, savings systems, and so on.
Factors and stages of pricing
In trading, pricing is determined by a number of factors. First of all, this process depends on the market niche that the company occupies. If this niche is in the market of perfect competition, then manufacturers have practically no influence on the price, since they are forced to set prices at a level approximately equal to competitors. If the company occupies a niche in the monopolistic market, the price is completely controlled by the monopolist organization.
In addition, a very important factor is the market situation and the time fluctuations inherent in it. If there is a situation of stable demand on the market, the company can successfully use the mechanism of passive pricing. Its essence is to strictly adhere to costly pricing methods, regardless of consumer preferences and changes in the market. In the event of an increase in demand, it is necessary to take into account the opinions and desires of consumers. In such a situation, an enterprise needs to adapt to customers and respond to all market changes in a sufficiently mobile manner.
Pricing is also influenced by what stage of its life cycle the product being sold is at. If the product is new, reconnaissance prices are set. The cost can reach a significantly high level with stable demand, and when the market is saturated, the enterprise needs to reduce prices.
Pricing is carried out in several stages. Initially, the company needs to determine the goals of its pricing policy, and then analyze the level of demand for a particular product. The next stage is accounting and analysis of own costs, as well as studying the prices of competing enterprises. The final stage in the pricing process is to determine the method of pricing and their assignment to the manufactured product.
