Fundamentals of Economics. Pricing is ...

Pricing is the process of forming a value for services or goods, which is primarily characterized by methods and methods of setting prices in relation to all goods. Depending on the chosen method, development and achievement of the company's goals are determined. A comprehensive analysis of how different factors affect the range of the cost of goods or services, as well as the choice of the way that forms pricing, ensures the growth of profits.

Currently, the most common methods are:

1. Cost-based pricing is when the actual costs (in other words, costs) for organizing the production of goods (services), implementation and further support are taken as the starting point. This method is the most common.

2. Competitive pricing is the application of tactics and strategy for the formation of the value of the most successful competitors.

3. The method with demand orientation. In this case, pricing is a complex analysis and the subsequent formation of a price taking into account the optimal "price / cost" ratio.

Now we will consider in more detail the problem of pricing. As mentioned above, the cost method is the most common in most commercial structures. It is guided by modern legislation and the economy. Pricing is formed taking into account all costs. Set such prices for services that would ensure a return on costs and a stable level of profitability. The main advantage of this method is simplicity and guaranteed level of income.

The method of pricing, when the price of competitors for a similar product or service is taken as a starting point. Having learned the prices, the company decides on what level to keep the cost of the products. This method makes it possible to avoid price competition. However, there are also negative aspects. For different companies, the costs can be absolutely unequal. In other words, some can afford to keep low prices and at the same time be in profit, while others, without reducing the cost, will sooner or later be bankrupt.

The pricing method with demand orientation is quite long and expensive. It is based on the perception of the value of a product or service. To apply this method it is necessary to take into account that the perception of value in different people has differences.
This is due to taste, knowledge of the product or service, financial position and so on. The following values of value perception exist:

1. Value is low cost.

2. Value - the quality that I get for a price.

3. Value is compliance with my requirements for a product or service.

4. Value is what I end up getting for a fee.

Based on the established prices, you can calculate the sales volume using marketing research. Thus, it is possible to determine the level of prices that will allow the company to receive the desired profit and develop further.