Pricing Methods
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Pricing Methods
Broadly speaking, the pricing methods can be grouped into four main categories, namely pricing method based on demand, cost-based, profit-based, and based competition.
Method Based Pricing Request
Is a method that emphasizes the factors that influence customer tastes and preferansi than factors such as costs, profits, and competition. Their own customer demand based on various considerations, among which:
• The ability of customers to buy (purchasing power).
• customer willingness to buy.
• Positioning a product in the customer’s lifestyle, namely as to whether the product is a status symbol or just a product of everyday use.
• Benefits provided these products to customers.
• The price of substitute products.
• potential market for these products.
• The nature of non-price competition.
• consumer behavior in general.
• segments of the market.
At least there are seven pricing methods including the method of demand-based pricing, namely:
Pricing skimming
This strategy is implemented by setting a high price for a new product or innovation in the introductory stage, and then lowering the price at the time of starting tight competition. This strategy can work well only if consumers are not sensitive to the price, but rather emphasizes considerations of quality, innovation, and product capabilities in satisfying the needs.
Penetration Pricing
In this strategy the company tried to introduce a new product with a low price in the hope that will be able to obtain a large volume of sales in a relatively short time. The purpose of this strategy to achieve economies of scale and reduce the cost per unit. At the same time penetration strategy can also reduce the interest and ability of competitors because of low prices caused margins to be obtained every peusahaan limited.
Prestige Pricing
Strategy is to set a high price level that consumers are very concerned with status will be interested in these products and then buy it. Whereas if the price lowered to a certain extent, the demand for goods or services will decrease. Products that are often associated with prestige pricing include jewels, diamonds, luxury cars, and so on.
Price Lining
More commonly used at retail level. Here, sellers determine a price level of all goods sold. For example: a store that sells various kinds of shoes with the models, sizes and different qualities, determine the price of 3 levels of Rp. 30.000, -; Rp. 50.000, -; and Rp. 100.000, -. This will facilitate in decision-making for consumers to buy with prices that match their financial abilities.
Old-Event Pricing
This pricing method is often used for the sale of goods at the retail level. In this method, the price set by an odd number or size of the price even close to a certain amount. For example the price of Rp. 2975 for a particular group of consumers still think the price is still within the price range of USD 2000.
Demand-Backward Pricing
Where the pricing is through the process of walking to the back, meaning the company estimates a price level that consumers are willing to pay, then the company should determine the margin paid to the wholesaler and retailers. After that the new sale price can be determined
Bundle Pricing
Marketing strategy is two or more products in one package price. This method is based on the view that consumers appreciate the value of a particular package as a whole rather than the value of each item individually.
For example travel agency, offers vacation packages that include transportation, accommodation, and consumption. This method provides a large manfat for buyers and sellers. Shoppers can save the total cost, while the seller can reduce the cost of marketing.
Methods Cost-Based Pricing
In this method the price determinants are the main aspects of supply or cost rather than demand aspects. Pricing is determined based on the production and marketing costs are added with a certain amount so as to cover the direct costs, overhead costs, and profits. Method of cost-based pricing consists of:
Standard Markup Pricing
Pricing is determined by adding the percentage (markup) certain of the costs on all items within a product class. Percentage markup amount varies depending on the type of product sold.
Usually the products subject to high levels perputarannya smaller markup than the product perputarannya level low.
Cost Persentage of Cost Plus Pricing
Pricing is determined by adding a certain percentage of the cost of production or construction. This method is often used to determine the price of an item or only a few items. For example an architectural firm charge as much as 15% of the cost of construction of a house. So, if the cost of construction of a house valued at USD 100 million and the architect fee of 15% of construction costs (USD 15 million), then eventually the price of Rp 115 million.
Plust Cost Fixed Fee Pricing
This method is applied in many products that are highly technical nature, such as automobiles, aircraft, or satellite. In this strategy, the supplier or manufacturer will get in exchange for all costs incurred, no matter how big. But the manufacturer or supplier can only get a certain fee as a profit depending on the final cost of the project agreed.
Method-Based Pricing Profit
This method tries to balance revenue and costs in mpenetapan price. These efforts can be made on the basis of specific targets or volumelaba expressed as a percentage of sales or investment. Based pricing method consists of profit profit target pricing, target return on sales pricing, and target return on investment pricing.
Pricing Method Based Competition
Based on considerations other than cost, demand, or profits, price can also be determined on the basis of competition, that is what the competition is doing. Method of competition-based pricing of Customary pricing; above, at, or below market pricing; loss leader pricing; and sealed bid pricing.
Special Adjustment Against Price
Specific adjustments to the price according to the list (list price) consists of a discount, allowance, and the geographical adjustments (geographical adjustment).
Discount
Discounts are discounts offered by the seller to the buyer as a reward for a particular activity from the unpleasant buyer to the seller. These discounts are usually manifested in the form of cash or goods and is intended to attract consumers. There are four types of discounts, ie quantity discounts, seasonal discounts, cash discount and trade discount.
Quantity Discounts
Discounts are offered by the seller to encourage consumers to be willing to buy in larger quantities, or are willing to concentrate their purchases at these vendors so as to increase overall sales volume. For example a purchaser to buy at least 10 units, then given a 5% discount and if the purchase is less than 10 units did not get cut.
Seasonal Discounts
Discounts are given to buyers to make purchases outside of a particular season. For example, buyers who purchase a raincoat in the summer, will get discount of 5%, 10%, and 20%.
Cash Discounts
Pieces are given to the buyer for payment on a period and they make payments on time. For example a seller offers a product with the payment terms. If the buyer can pay within 10 days, they get 2% discount and payment must be made within 30 days after goods received.
Trade Discount
Also referred to as functional pieces, are offered discounts on the buyer for payment to the marketing functions that they do. So the trade discount is only given to buyers who come to market its products. They include dealers, both wholesalers and retailers.
Allowance
As with any discount, allowance is also a reduction from list price (price list) to the buyer because of certain aktivitasaktivitas committed buyers. There are three types of allowances commonly used, namely:
Trade in Allowance
Discounts are given in the trade system.
Promotional Allowance
Discounts are given to the seller or distributor who does the distribution of advertising or sales activities which can promote a certain product manufacturers. Promotinal form of allowance can be paid in cash or a smaller number of free products more.
Product Allowance
Discounts are given to buyers who are willing to buy goods in abnormal conditions.
Geographic Adjustment (Geographical Adjustment)
Geographic adjustment is adjustment to the price by the manufacturer or wholesaler is also a geographic adjustment to the price adjustments made by the producer or also in relation to the cost of transporting the product from seller to buyer. This transportation cost is one important element in the total variable costs, which would determine the final price to be paid by the buyer. There are two methods commonly used to make geographic adjustments, namely:
FOB (Free On Board) Origin Pricing
FOB (Free On Board) means the seller bears the costs until the loading of product to transport used (eg ships, trucks, trains, and so on). Generally, the FOB (Free On Board) Origin Pricing sellers determine the location of the loading of product, which is in seringkalinya factory, warehouse sales, or in the nearest port from sellers location. Responsibility for the products will be shifted to the buyer when the product is loaded into transport vehicles. All transportation costs and incurred subsequent product handling buyer. Buyers who located the furthest will bear the greatest transportation costs.
Uniform Delivered Pricing
In this method, the seller set the price includes all transportation costs. Sellers determine how to transport, pay for transportation costs, and responsible for any damage that may occur. Therefore, the seller is responsible to the product acceptable buyer.