Market Pricing Methods

Market pricing methods are quite diverse. There are many methods of establishing an optimal price for a commodity. Absolutely everything is impossible to capture with attention. Therefore, we can focus only on the most relevant and not problematic for implementation in practice.

Pricing is a dynamic concept. To choose once the method of forming prices and adhere to it for decades is impossible. The price is influenced by many factors, which include both the preferences of customers and the policy of competitors. For effective work, pricing methods should be periodically changed, adjusted and revised. This is necessary in order not to lose their positions in the market in a competitive environment.

Market pricing methods are determined by the value of the product for customers, the degree of intensity of competition, the attributes of the brand and the loyalty of consumers to the product.

Pricing in market conditions depends on the market itself (the prices of competitors are influenced when the "race for the leader" or the method of average market prices is relevant) and from the customer (prices depend on demand, customer expectations, value of the offered goods for buyers).

Market pricing methods take into account not only the level of demand for a product.

If we consider the approach in which a firm generates prices for its goods only from the fact that the consumer himself assesses the value of the proposed product, then the main factor here is customer perception. With this system, the consumer gives money for "value", not for the cost. The sensitivity to the price is elastic, which makes it possible to calculate the optimal price for the goods to maximize profits.

Market pricing methods will include a method emanating from a competitive factor. The decision on the price of a product is determined by the structure of the market. With this method, firms choose a price policy just below or slightly above the prices of competitors. In this context, the most common methods are: the method of a sealed envelope (tender pricing) and the current price method (standard prices are established for a similar product on the market).

To set a price in view of demand, you need to study and analyze the market in order to know the dependence of prices on demand.

Another method of market pricing is the price-setting method, aimed at getting in balance between the state of the market and the costs of production. In this case, the manufacturer must ensure a price-to-competitor ratio and other products of his firm.

When setting prices based on the product range, you need to determine the price lines that link the sale of goods in a certain price range. Many types of goods have traditional price scales, to which both producers and consumers adapt over time. When establishing price lines and final prices for goods, one must take into account the possible reaction of consumers to them.

Pricing in the market of perfect competition is determined by the fact that there are a lot of buyers and sellers in this market. Therefore, individual market players can not affect the price. The equilibrium of prices in this market is conditionally external. Each seller in such a market is actually a price-collector. The market of perfect competition itself determines the price of goods. And this price already establishes a balance of supply and demand for goods.

In a competitive environment, price changes must occur promptly. The firm should always have a prepared program in hand, which will help in a timely manner to take a counterstrategy to the prevailing price situation that arose on the initiative of competitors.