If I talk about importance of pricing process then there are multiple points that you should keep it in your mind;

• Pricing is important for determination of revenue which is going to generate.
• Pricing is always important to know profitability and competitiveness of a particular thing.

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• Pricing is always important to know market positioning of a particular product that where a particular product is lying in market.
• Pricing have a lot of importance to know that which value customers give to particular product or which is the perception of customers towards a particular product.
• Pricing is always important for creation of a competitive advantage or benefit.
• pricing have a lot of importance when we talk about recovering of cost.
• Pricing is always important for affecting reputation and identification of a particular brand.
• Pricing is always important for management of sustainability of a particular business.
• Last but not least pricing is important for management of supply and demand dynamics of a particular product.

if you want to set price of a particular product or service then there are different things that you need into your consideration;

• There are some of the internal factors you should keep in your consideration which include cost of a particular product ,value proposition of a particular product and targeted profit margin that you want to gain.

• There are some of the external factors in which you can consider conditions of market that where market is going on economically, you should also keep in mind that are customers willing to pay or not, some particular amount or pricing as well as what is competitor pricing is also an important consideration.

There are some of the Other factors you should keep in consideration which include proper strategy of pricing, elasticity that you want to give your customers,price regulatory needs ,image or identification of your brand and segmentation about customers.

If you will consider these factors then definitely you will be able to give shorting of a most competitive and demand able price which would reflect values of product and would also meet requirements of customers and ultimately it leads to success for your business.

if I talk about examples of business is that can fit in multiple pricing methods so I am explaining about some of the examples below;

• If I talk about penetration pricing then here dollars are useful for storing low prices for attracting customers and for gaining share from market.

• If I talk about value based pricing then there are some of the luxury brands which charge high prices from their customers because of value and reputation of brand that customers perceive like Apple iPhone.

• If I talk about post plus pricing then there are companies which are all about construction purposes and their charge depending on the material and labour cost provided by customers.

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• If I talk about dynamic pricing then here airline adjustment ticket prices comes because their prices may fluctuate depending upon availability and demand.

If you want to be d German percentage of profit to be added then you should first make your calculations at desired profit and then you should allocate it to each unit 1 by 1.

Calculation of total desired profit

Desired profit or return at investment (ROI) = 20% of $130,000
= 0.20 x $130,000
= $26,000

Calculation of total revenue required

Total revenue is required to total profit according to your target plus cost of production

Total production cost = Total unit production cost x sales volume which is expected

= $25.00 x 21,000 units
= $525,000
Total revenue = $26,000 (Targeted profit) + $525,000 (production cost)
= $551,000

Calculation of selling price per unit

Selling price per unit is equal to revenue generated in total divided by sales volume which is expected.

= $551,000 / 21,000 units
= $26.24

Calculation of percentage of profit to be added

Percentage of profit = ((Selling price each unit - Total unit production cost) divided by total unit production cost) x 100

= (($26.24 - $25.00) / $25.00) x 100
= 5%

That's why if I talk about 5% profit margin then it must be added to total unit production cost of $25.00 for achievement of needed profitability.

If we want to determine lounge price then we need to calculate total profit which is desired and then we will allocate it to per unit one by one.

Calculation of total desired profit

Required return at investment (ROI) = 20% of $130,000
= 0.20 x $130,000
= $26,000

Calculation of production cost

Total unit production cost = $25.00
Total production cost = Total unit production cost x Expected sales volume
= $25.00 x 21,000 units
= $525,000

Calculation of total revenue required

Total revenue may be calculated by total desired profit adding into production cost

= $26,000 (desired profit) + $525,000 (production cost)
= $551,000

*Calculation of selling price each unit

Selling price per unit is defined as total revenue divided by sales volume which is expected

= $551,000 / 21,000 units
= $26.24

That's why from calculation it's clear that product must be launched in domestic market at a price of minimum $26.24 per unit.

For determining that it is possible to compete or not you should calculate minimal price which is required for achieving desired returns at investment so let's go for making calculations;

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• If I talk about desired ROI then its 20% of $130,000 which is equivalent to $26,000
• If I talk about production cost in total then it's around $25.00/unit x 21,000 units which is equivalent to $525,000
• If I talk about revenue required in total then it's $525,000 (production cost) + $26,000 (Required profit) which is finally around $551,000
• If I talk about minimal selling price then it may be calculated as $551,000 ÷ 21,000 units which is equivalent to $26.24/unit

So finally you can see that competitor price is $28.00 so now if you want to compete then you can compete by pricing their product minimal at $26.24 around but still you can achieve required ROI. This is a pricing could be helpful for attracting price-sensitive customers and for gaining market shares.

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