The Biggest question after making a product is what should be the price of the product??. It should be less than the competitor so that people will get attracted or It should be greater than the competitor so that people will think this is a better product. There are infinity question around how firms set product prices??
Below details are just a small incite to the pricing details...
Relative Price:
The difference between nominal price and relative or real price (as exchange ratio) is often made. Nominal price is the price quoted in money while relative or real price is the exchange ratio between real goods regardless of money. The distinction is made to make sense of inflation. When all prices are quoted in terms of money units, and the prices in money units change more or less proportionately, the ratio of exchange may not change much. In the extreme case, if all prices quoted in money change in the same proportion, the relative price remains the same
The concept of price is central to microeconomics where it is one of the most important variables in resource allocation theory (also called price theory). Price is also central to marketing where it is one of the four variables in the marketing mix that business people use to develop a marketing plan.
More empirical research needs to be done to better understand the price-setting process and, in particular, the relationship between firms’ pricing objectives, pricing strategies and other elements of the pricing decision.
1. Price skimming
We set the initial price high and then systematically reduce it over time. Customers expect prices to eventually fall.
2. Penetration pricing
We set the initial price low to accelerate product adoption.
3. Experience curve
We set the price low to build volume and reduce costs through pricing accumulated experience.
4. Leader pricing
We initiate a price change and expect other firms to follow.
5. Parity pricing
We match the price set by the overall market or price leader.
6. Low-price supplier
We always strive to have the lowest price on the market.
7. Complementary
We price the core product low when complementary items such as product pricing accessories, supplies and services can be priced higher.
8. Price bundling
We offer this product as part of a bundle of several products, usually at a total price that is lower than the sum of individual prices.
9. Customer value pricing
We price one version of our product at very competitive levels, offering fewer features than are available on other versions.
10. Cost-plus pricing
We establish the price of the product at a point that gives us a specified percentage profit margin over our costs.
11. Break-even pricing
We establish the price of the product at a point that will allow us to recover the costs of developing the product.
12. Price signaling
We use price to signal the quality of our product to customers.
13. Image pricing
We offer an identical version of the product at a higher price.
14. Premium pricing
We price one version of our product at a premium, offering more features than are available on other versions.
15. Second market
We price this product at very competitive levels for the purpose of discounting exporting or selling in secondary markets.
16. Periodic or random
We periodically or randomly lower the price of this product. discounts
17. Geographic pricing
We price this product differently for different geographic markets.
18. Perceived value pricing
We price this product based on our customers’ perceptions of the product’s value.
19. Internet pricing
We price this product differently on our Internet website compared to the price we charge through our other sales outlets.
The Biggest question after making a product is what should be the price of the product??. It should be less than the competitor so that people will get attracted or It should be greater than the competitor so that people will think this is a better product. There are infinity question around how firms set product prices??