Q:

What are some methods of making pricing decisions?

A:

Quick Answer

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.

Know More

Full Answer

According to McKinsey & Company, increasing the price of a product or service by only 1 percent translates into a profit increase of 8.7 percent, assuming volume remains the same. There are four methods a company can use to calculate the optimal price.

  1. Cost-plus pricing
  2. This is one of the most simple methods. First, calculate the actual cost of the product, and then determine how much profit is desired to be made from the item and add that to the cost, which results in the final sale price.
  3. Demand pricing
  4. Demand pricing is based on two factors: sales volume, which is what is actually sold, usually measured in dollars or units, and the desired profit. To calculate demand pricing, it is necessary to come up with a price that will give the best profit-to-volume ratio.
  5. Markup pricing
  6. A set amount is added to the cost of the item, usually a percentage that is determined ahead of time. This amount is referred to as a markup.
  7. Competitive pricing
  8. Sometimes the market has already established an acceptable price for a product or service. This means a business needs to keep its price within that range.
Learn more about Marketing & Sales

Related Questions

  • 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 is the definition of "market aggregation"?

    A:

    "Market aggregation" is defined as the marketing of standardized goods and services to a large population of people that have similar needs, according to Inc. Another name for market aggregation is "mass marketing," a strategy that treats all customers as a single group that is handled homogeneously.

    Full Answer >
    Filed Under:
  • Q:

    What is buzz marketing?

    A:

    Buzz marketing refers to a marketing strategy employed by firms and marketing agencies to spread word rapidly about a novel product or service, using citizens as brand promoters. Buzz marketing essentially acts as corporate gossip, but instead of spreading news and information about people, it educates customers about products. Buzz marketing employs a word-of-mouth marketing program, utilizing many channels for communications, including social media, print sources and mobile devices.

    Full Answer >
    Filed Under:
  • Q:

    What are some of NASCAR's marketing strengths?

    A:

    NASCAR created one of the largest and most successful marketing campaigns in the field of sports by capitalizing on large audiences and even larger venues. Furthermore, NASCAR has made everything under its control a potential marketing opportunity, from the jackets the drivers wear to the names of the races.

    Full Answer >
    Filed Under:

Explore