The main stages of pricing policy development.
1. To establish the following aims of pricing:
· To survive and to thrive: it is the main aim of company activity because of tough competition when there is a great number of companies with similar goods in the market. The main competitive advantages here are: sales volume and market share. Keen (predatory) prices are used for market expansion and increase of sales volume.
· Profit maximization.
· To maintain a position in the market.
2. To carry out demand assessment.
It is important to pay attention to the elasticity of demand - reaction of buyers on increasing or decreasing price.
3. To carry out the opportunities of a company.
4. To carry out the opportunities of its rivals.
It is reasonable here to do SWOT analysis or for example PEST/ analysis of internal context.
5. To choose pricing strategy and pricing method.
There is a great number of pricing strategies:
· market skimming pricing strategy – establishing too high prices;
· neutral price formation;
· keen price setting;
· strategy of differentiated prices;
· strategy of reduced prices;
· strategy of price leading;
· strategy of competitive prices;
· strategy of discriminatory prices;
· matrix pricing strategy and many others;
and pricing methods:
· cost-based methods( method “costs plus profit”, method of costs in full, direct costs, method of target income)
· market methods(price setting according to the demand, according to the competition, tender method )
· parametric methods (method of regression analysis, method of specific indicators) and others.
6. The analysis of the following factors, which can influence establishment of price:
· Demand for the goods
· Government price regulation(direct control or inferential control )
· Production costs and launching expenses
· Competition
· Stage of product life cycle
· Product promotion
7. The final price assertion.
