Objectives & Methods Pricing Approach

Definition / Definition of Price (Price)

Price is a very important part in the marketing of a product because the price is one of the four marketing mix / marketing mix (4P = product, price, place, promotion / product, price, distribution, promotion). 

Price is an exchange of goods or services is expressed in monetary units. Price is one determinant of the success of a company because the price determines how much profit to be gained from the company's sale of its products in the form of goods and services.

Set the price too high will cause sales to decline, but if the price is too low will reduce the profitability enterprise organizations ..

 The purpose Pricing

1. Maximum benefit With competitive pricing, the company will gain optimal profit.

2. Maintain company Of the company's profit margin obtained will be used for operational costs of the company.

Example: for salaries / wages of employees, to pay electricity bills, water bills underground, purchase of raw materials, transportation costs, and so forth.

3. Achieving ROI (Return on Investment) The company would want behind the capital investment made in the company so that the exact pricing will accelerate the achievement of capital return / roi.

4. Mastering Market Share By setting a low price compared to competing products, it can distract consumers from the products of competitors on the market.

5. Maintaining the status quo When a company has its own market, adjustments should be made at the right price in order to maintain existing market share.

 How to / Techniques / Methods Product Pricing

1. Supply and Demand Approach (supply-demand approach) From the level of demand and supply that is determined equilibrium price (equilibrium price) in a way that is able to find the price paid by consumers and the price received by producers forming the requested amount equal to the quantity supplied.

2. Cost approach (cost oriented approach) Determine the price by calculating the cost manufacturer with the desired profit level both with markup pricing and break-even analysis.

3. The market approach (market approach) Formulate prices for products marketed by calculating the variables that affect the market and prices as political circumstances, competition, social, cultural, and others.

Six Biggest Pricing Mistakes

Sound pricing structure helps companies generate sales and build customer loyalty.

Wrong pricing structure can make the business work hard to serve our customers and achieve profitability.
If you need to set the price to be charged for a product or service, avoid the common mistake of pricing it.

 Sell too cheap To set a realistic price, you need to know all the costs involved in making the product or service.

This includes costs such as prices ease tracing of parts and supplies, as well as less tangible costs associated with the skills and knowledge you bring to the table.

Some employers set a price that does not account for all these expenses.
They may forget to add overhead costs such as electricity, water or rent, or having difficulty to appreciate the value of their time.

One business approach based services are used to determine a reasonable price for the supply of goods and services are set wage per hour for loading services.

They then multiply this number by the number of hours required to complete a task in order to establish the overall price of the project.

Following the competition By basing your pricing structure on a competitor's price can be dangerous because of the costs used to calculate the price competition may have nothing to do with your costs.

They may pay a price lower or higher than you do, buy a different technology, and has a marketing budget larger or smaller.

Nevertheless, it is useful to know how the prices charged competitors so that you can realize that your price is realistic for the market. If you find that your prices are much lower than competitors, check to make sure you did not miss any of the pricing equation.

Price competition Pricing is simply to beat the competition is a weak proposal.
This way you will indeed attract buyers, but the chances of them not a loyal customer.

If low prices attract them to your business, they may leave your company so there are better options.

A better approach is to differentiate between your business with competitors in other ways, such as superior customer service, improved product characteristics, or better quality. 

Waiting too long to raise prices Increased demand or increased inventory costs can put you into a position where you have to decide whether to raise or not to raise prices.

Some business owners avoid price increases because they fear customers will react negatively. In many ways, a better strategy is regularly gradually raise prices rather than burdening the customer with a large price increase.
In other words, a 10 percent price hike likely brought more negative attention than twice the price increase of 5 percent. Lowering prices without changing the shipment Some customers may be trying to subtly get a lower price than your company.

It can put you in a difficult position, especially if you run a business based on service. Sending an agreed order with lower price could send messages as if the initial price is too high, and all the next business would be open to negotiating the price.

A better approach is to accept a lower price, but changing slightly the delivery terms. For example, if you are negotiating the price for the technical installation for three months, you could agree to lower project costs that reduced the number of weekly meetings or monthly shortened.

Another reasonable option for large orders is set lower prices as discounts for large quantities.

Set the price at random Some customers may be urged to find out how you design the pricing structure, so it is important to get the fundamentals justify your pricing Additionally unless you are quite aware of how the costs associated with your prices, it would be difficult for you to recognize when it is appropriate to adjust your pricing.

Pricing Strategy Based on Customer Value

With value based pricing approach, many companies managed to build a better pricing scheme and better understand each other what makes consumers willing to reach into pocket.

Various challenges faced by the company, there are several ways to overcome barriers to determine the pricing policy .

I think companies should focus on three things as below:

1. Focus on Customer Value In this case, the company should not put too much emphasis on product.

Features that or just on the price of these products, but more importantly, the company should be more focus on a variety of benefits, whether functional or emotional benefits that can be received by the customer of the product.

2. Provide Differentiation In Products And Services Products or services that the company should have a higher value than competitors.

If not, then the company would be stuck in a situation where the company will be forced to play the price war. This would effectively destroy the ability of companies to set premium rates.

This means that if a company can not make a differentiation that company will have difficulty in setting the price based on the value or benefits that can be provided.

3. Understanding and Communicating the Value Potential All Sources In order to perform value-based pricing is well, then the company should understand the value or benefits received by the customer.

This means that companies must be able to understand what the customer wants and needs.
If the company already understand this then the next thing is to communicate the benefits of the product to the customer that the customer's product consumption has benefits for himself.

Even worse if the benefits of these products exceed the expectations of the customers, it will likely create a loyal customer.

So by using a value-based pricing, customers will benefit from it (products or services), and other than that value-based pricing also has the ability to produce products or services that are superior to competitor products.