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

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.


Is this answer helpful?

Similar Questions

  • Q:

    What is deceptive pricing?

    A:

    Deceptive pricing occurs when a retailer uses a pricing gimmick to make customers believe they are getting a bargain when they are not. Deceptive pricing can include a going-out-of-business sale or a bankruptcy sale when the company is not closing.

    Full Answer >
    Filed Under:
  • 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 is the average pricing for 1-800-Got-Junk?

    A:

    1-800-Got-Junk does not have a standard average price. The pricing for the waste removal service depends on a number of variables, including the service area, amount of space in the truck used and the type of material being removed. The company has more than a dozen pricing categories.

    Full Answer >
    Filed Under:
  • Q:

    What are backward and forward linkages?

    A:

    Backward and forward linkages describe the economic relationship between the customer and company. The concepts were developed by Albert Hirschman, an influential European economist.

    Full Answer >
    Filed Under:

Explore