What is demand-backward pricing?
Credit: Daly and Newton Stone Getty Images
Q:

What is demand-backward pricing?

A:

Quick Answer

According to businessdictionary.com, demand-backward pricing is a pricing method in which the actual costs of the product are deducted from what the consumer is willing to pay. If a satisfactory profit is still reached, the method can be considered successful.

  Know More

Full Answer

As the name suggests, demand-backward pricing involves working backward. Producers estimate what they believe the consumer would be willing to pay and then adjust accordingly until the proper figure is reached. This method is especially popular in women's and children's shopping items, such as beauty products, clothes, shoes and toys. Items that are commonly gifted also fit this criterion, as the buyer will typically decide beforehand how much he or she is willing to spend.

Once the final price is reached, if wholesalers are not successful in selling the product, producers typically adjust not the price but the quality of the components. Therefore, the cost of the product is generally resistant to the effects of the market.

The pharmaceutical industry also engages in this method of pricing. Because the per-unit cost of drugs is typically much lower than the consumer price, the pharmaceutical industry makes incredible profit. People who need these drugs often have little choice but to pay the price.

Learn more about Marketing & Sales

Related Questions

  • Q:

    What is "trade marketing"?

    A:

    "Trade marketing" is an area of marketing focused on driving demand of distributors and retailers for manufactured goods. Trade marketing includes trade promotions that are tailored toward these larger groups to set products apart from the competition, grow product visibility and create better purchasing rates. Trade marketing is a smaller subset of marketing and is a different field from consumer marketing that relies on customer strategies to drive sales.

    Full Answer >
    Filed Under:
  • Q:

    What are some methods of making pricing decisions?

    A:

    The four basic methods of making pricing decisions are cost-plus pricing, demand pricing, markup pricing and competitive pricing. These methods are used to determine the optimal price that a customer is willing to pay for a product or service.

    Full Answer >
    Filed Under:
  • Q:

    How does one make a questionnaire on consumer awareness?

    A:

    Before you design a survey on consumer awareness, you must define your survey goals. You also need to know how and to whom you plan to circulate your survey, which determines the number of questions you have.

    Full Answer >
    Filed Under:
  • Q:

    What are examples of consumer markets?

    A:

    Examples of consumer markets include financial services, consumer electronics, food and beverages, apparel and accessories, leisure and entertainment, and healthcare. These are markets in which buyers purchase products or services for personal consumption rather than resale.

    Full Answer >
    Filed Under:

Explore