What is the importance of the pricing process?

Importance of pricing process can be determined by the following points;

• It is reflecting value of proposition.
• It is useful for covering cost and generation of profits or revenue.
• It is useful for influencing customer buying decisions.
• It is useful for differentiating from its competitors.
• It is useful for knowing adaptations of market alternations.

Source

• It is useful for achievement of financial goals that you set.
• It is important for maintenance of market share.
• It is important for sustainability of longer time growth.
• It's really important for showing of overall reflection of brand.
• It is important for supporting some of the marketing techniques.
• It is important for encouragement of sale and purchase and for management of demand and supply.
• It is important for optimisation of revenues and for reduction of price wars.

What aspects should be considered when setting the price of a product or service?

Before setting price of a product there are somethings which need to be considered;

• It is important to consider cost at production, at labour.
• It is important to consider value proposition, unique features and their benefits that are associated.
• It is important to keep in mind that customers are willing to pay for product or not.
• It is important to keep an eye at supply and demand dynamics.
• It should be important to consider that what is budget position of a particular brand according to its identification.
• It is important to consider that what should be the pricing strategy like penetration,skimming or neutral.
• It is always important to keep in mind that what is desired profit you want to achieve so from here you can know about profit margin.
• It is important to consider some regulations include tax, laws and standards of industry in particular.
• It is important to keep in consideration that which is ability of flexibility is present in case of any need for adjustment of price.

Provide examples of businesses that fit the pricing methods explained in class, stating your reasons

These are some of the examples of businesses which fit in some particular pricing methodology;

• There are penetration pricing which are offering minimum prices for attracting customers and for getting share from market.
• There are price skimming methods which are charging maximum prices for their innovative products so that they can maximize profits before the see any increase in competition.

Source

• There are neutral pricing methods in which price setting is base at cost, competition and audience that are audience have willingness to pay for that product or not.
• There are value based pricing method in which prices are based at perceived values and prestige of products.

What percentage of profit should be added to a total unit production cost of $25.00 to achieve the desired profitability?

For achievement of 20% return on investment ($130,000),target profit is $26,000 (20% of $130,000).

Expected sales volume is around 21,000 units
Total desired profit is around $26,000
Profit per unit is calculated by $26,000 divided by 21,000 units which is equal to $1.24

Current unit production cost is around $25.00
Desired selling price can be calculated by adding $25.00 into $1.24 and then I got $26.24 as answer.

Profit percentage can be calculated as follows:

($1.24 / $25.00) x 100% ≈ 5%

At what price should it be launched in the domestic market

While determining launch price you should calculate total profit which is required and then add it to unit production cost.

Target profit is 20% of $130,000 which is calculated as $26,000
Expected sales volume are around 21,000 units
Profit per unit is calculated by $26,000 divided by 21,000 units which is around $1.24.

Source

Unit production cost is around $25.00
Targeted selling price is calculated by adding $25.00 into $1.24 so as a result I got $26.24

Hence, products should be launched in domestic market at around $26.24 per unit.

If the competition has a price of $28.00 for a product with similar characteristics, would it be possible to compete?

By keeping in mind different calculations, targeted selling price is at around $26.24. Since competition's price is $28.00 so steemians can compete with minimal pricing.Now it could be a competitive benefit which attracts price-sensitive customers.Meanwhile steemians must be focused at other factors like quality, features, and reputation of a brand or product for giving surety so that they may compete in market in effective manner. A pricing of $26.24 to $27.99 can be a viable competitive technique.

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