2.1. Basic Pricing Concepts
A major factor in determining the profitability of any product is establishing a base price.
There are three methods of setting a product’s base price:
- Cost-oriented pricing
- Demand-oriented pricing
- Competition-oriented pricing
Cost-Oriented Pricing
Definitions
In cost-oriented pricing, marketers first calculate the costs of acquiring or making a product and their expenses of doing business, then add their projected profit margin to arrive at a price
Demand-Oriented Pricing
Definitions
In demand-oriented pricing attempt to determine what consumers are willing to pay for goods and services
Competition-Oriented Pricing
Marketers may elect to take one of three actions after learning their competitors’ prices:
- Price above the competition
- Price below the competition
- Price in line with the competition (going-rate pricing)
Definitions
In competition-oriented pricing the price is determined according to the competition.
Tasks
Watch this video to gain more insight into the different pricing policies :
