Price Psychology; A Strategy that gets customer’s buying demand

Price setting in different business establishments today varies according to the marketing approach of the product offered.  The modern marketing considers the pricing strategy as the ultimate stage of whether the customer will gave in from the offered price of the company.  From the viewpoints of Kotler & Keller, Setting the Price has 6 steps procedure to consider

1. Selecting the price objective: in setting the price a company must set its objective as to the survival of the product, Maximum current profit, maximum market share, maximum market skimming, product-quality leadership, & other necessary objectives like partial and full cost recovery.

2. Determining demand: requires the participation of the customer and the assistance of the supplier. Level of demands varies from different product characteristics of the company. Some general concepts of market demands are from price sensitivity, estimating demand curves, and price elasticity of demand.

3. Estimating cost: cost minimization is the key to the overall profitability of the firm. Calculating the fixed cost or overhead, variable cost, total costs, and average cost will give the firms guidance towards the activity-based cost of the firm. Accumulated production on the other hand relates to the experience curve or the learning curve of the manpower of the organization. Consequently, target costing is a relevant process of estimating the cost of the organization using the academic knowledge from the different faculties like designers, engineers, and purchasing agents.

4. Analyzing Competitors’ Costs, Prices, and Offers: refers to the analysis and studies of the organization’s competitors. By looking to your competitors cost, price, and offerings as a marketing agent point of view you can determine the marketing power of your product and your company towards the market and other competitors and ultimately know your market share.

5. Selecting a Pricing Method: It doesn’t mean that all products has the same pricing method.  Before you put the prices to the market you need to consider different techniques and theories of pricing.  The common given methods are markup pricing, target-return pricing, perceived-value pricing, value pricing, going-rate pricing, and auction-type pricing.

6. Selecting the final price: the vital step in pricing is the time when the marketing team will decide the final price for the product or products of the company.  This final process requires concerns in terms of impact of other marketing activities, company pricing policies, gain-and-risk-sharing pricing, and impact of price on other parties.  

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