Pricing

Pricing

In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.

PRICE – The amt of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

“One can define price as that which people have to forego in order to acquire a product or service.” What does a buyer think? To a buyer, price is the value placed on what is exchanged. Something of value – usually purchasing power – is exchanged for satisfaction or utility. Purchasing power depends on a buyer’s income, credit, and wealth.

Pricing Strategies

The only time when price setting is not a problem is when you are a “price-taker” and has to set prices at the going rate, or else sell nothing at all. This normally only occurs under near-perfect market conditions, where products are almost identical. More usually, pricing decisions are among the most difficult that a business has to make. In considering these decisions it is important to distinguish between pricing strategy and tactics. Strategy is concerned with setting prices for the first time, either for a new product or for an existing product in a new market; tactics are about changing prices. Changes can be either self-initiated (to improve profitability or as a means of promotion) or in response to outside change (i.e. in costs or the prices of a competitor).