The manner in which the company set the price depends on your pricing strategy overall. For example, suppose the company’s strategic objective is to optimize revenue. With this strategy, the company does not expect to recover all their costs quickly. Immediately would plan only cover variable costs that are legally required (such as payment of debts), and receive income as pay fixed costs such as administrative overhead. To have a steady stream of income, the company would price their products lower than in other conditions. Attracted by this low price, more consumers buy the product, which the company would get the revenue needed to cover its costs in the long run.
Alternately, a profit optimization strategy would require higher prices and more rapid recovery of costs, to generate more profits faster than other strategies. Also the strategies related to corporate image have an effect on pricing decisions. For example, to have a prestigious image, the company would set a higher price. The organizations consider internal and external factors in setting prices.
For costs, in this case the company is interested in covering their full costs first, then focus on profits. Cover operational commitments and suppliers. Prices in this case are not so high, so it applies to consumer products, entry of new brands.
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The internal elements most important to the company to be considered are:
Cost factors. If the company wants to prosper, it must cover all costs that are generated by the production and marketing of the product. In addition, you need to get a reasonable profit. Otherwise, do not justify the time and expense incurred to bring the product to market. Consequently, marketers determine the variable costs related to products, fixed costs to be allocated to the products themselves and the amount of profits or performance is expected to generate each unit.
Supply and demand. The consumer demand can be very price sensitive, especially in non-essential products. Companies must understand the nature of their products have substitutes, which are complementary to and level of dependency between them, the virtual of the quality and expectations sufficiently to predict whether the demand will change significantly in response to changes the prices.
Ethical considerations. The pricing decisions, companies must consider more than profits and losses, the perception that consumers have regard to whether the price is higher, depending, of course this segment which is oriented. Avoid negative perception of exaggerated price is very important.
Legal and regulatory factors. Of course, companies must be careful with the use of authorized inputs, any changes or withdrawal of inputs by the health sector requires a change in the product, which can lead to loss of market. Otherwise it could take costly litigation that would have fines.
Production equipment and technology. Clearly, with old technology, there are higher costs and lower profit margins and loss of competitiveness. The low operating cost with new or existing technology.
The Personal. This factor determines the fixed costs that must be properly balanced to avoid having a balance and set prices too high above what is reasonable. Salaries and employee benefits should be based on the growth of the company.
Provider. Undoubtedly, good management, vendor selection that guarantees the supply and quality, will give us credit costs low and controlled.
The list of ways that companies can use to adjust their prices is long and is constantly changing, dynamic market and press. Among the usual practices include price fixing odd / even, packaged, and captive product discounts. You should review these and other pricing tactics prior to the exercises.