Select the correct sequence of steps in setting a pricing policy

Eduncle Best Answer

When setting a pricing strategy you have to consider the following 6 factors;

1. Select the pricing objective to decide where you want to position your market offering. The five major objectives that you can pursue are survival, maximum current profit, maximum market share, maximum market skimming or product –quality leadership.  Having a clearer objective makes it easier to set a price.

2. Determine the demand. The price you set will affect the demand level and impact your business objectives differently. In normal situations, price and demand are inversely related, in that the higher the price the lower the demand and vice versa.

3. Estimate the costs. While doing this, you want to charge a price that covers your cost of production, distribution and selling of the product plus a decent return for your efforts and risks.

4. Analyze competitor costs, prices, offers and possible reactions. You should consider your nearest competitor’s price, product features and evaluate them to check their worth to the customers. You can then decide to charge more, same as competitor or less.

5. Select a pricing method. When selecting, consider the cost of the product or service, competitor prices and the customer’s assessment of the unique features. 

6. Finally, select the price. Here, you must consider the following: 1) Impact of other marketing activities like brand quality and advertising in relation to competition.2) Companies pricing policy, 3) Impact of the price on other parties like the distributors and dealers.