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There are four major pricing policies. They are:
- Cost based pricing. In this policy, the firm determines its price by taking the cost of the product and adding on a predetermined percent of the cost as profit.
- Value based pricing. In this policy, the firm tries to determine how the product is valuable to consumers. This requires a great deal of research into how customers perceive and use the product.
- Demand based pricing. In this policy, managers try to determine the level of demand at different price points. They then try to determine which price point would be most profitable given their own costs.
- Competition based pricing. In this policy, firms respond to the prices set by their competitors.
The main pricing policies are
Premium Pricing – in this, the product price is keeping unique to encourage potential buyers.
Price Skimming – in this, the price is set high to get substantial competitive advantages.
Penetration Pricing – in this, the product price is setting to low so customers attracts towards the product and gain market share.
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