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What Is A Price And Types Of Prices? What Factors Should Be Considered When Setting Prices?
Price is the money paid by the consumer, individual or organization against using or consuming any good of services permanently. Price is the value paid by the consumer for getting any benefit through product or service. There are two types of prices one is static price and second is dynamic price. The static price is the price which the consumer pays against any single good purchase. While the dynamic price changes with the quantity purchased by the consumer the more the good purchased the lower the price. By applying the concept of dynamic pricing the businesses earn maximum profits. In case of auction the prices is negotiated between buyers and sellers.
Price is the only factor which makes money for the businesses so it is very important when setting prices of any product or service. It also varies according to demand and supply. If the demand of any specific product is high then its price would be high. There are several factors which should be considered when setting price for any business. One of the thing that should be consider when setting any price of specific product or service is that whether the company want to expand his profit margin, whether it wants to go for market penetration or the company wants to be leader in providing the quality products to its customers. So all these mater should be taken into consideration when setting pricing strategy.
Price is the only factor which makes money for the businesses so it is very important when setting prices of any product or service. It also varies according to demand and supply. If the demand of any specific product is high then its price would be high. There are several factors which should be considered when setting price for any business. One of the thing that should be consider when setting any price of specific product or service is that whether the company want to expand his profit margin, whether it wants to go for market penetration or the company wants to be leader in providing the quality products to its customers. So all these mater should be taken into consideration when setting pricing strategy.
There are three types of pricing strategies which include cost based pricing, competitive based pricing and customer based pricing. In the cost based pricing, cost per unit of the product is calculated and then a small profit is earned per unit. In the competitive based pricing, the prices are charges according to the prices of the substitutes available in the market. However, this pricing strategy is not successful because it ignores the costs incurred by the companies. Thirdly, there is customer based pricing which is decided in consideration to the reservation price demanded by the customers. Some other types of pricing includes skimming price and penetration pricing strategy. In skimming pricing the companies want to earn higher profits and to quit from the market while in the penetration pricing, low prices are charged to make a visible position in the market.
Price lining
Predatory pricing is the practice of selling a
product or service at a very low price, intending to drive competitors out of
the market, or create barriers to entry
for potential new competitors
Yield Pricing:
Hotels and airlines use yield pricing, by which they offer lower rates on
unsold inventory just before it expires
product or service at a very low price, intending to drive competitors out of
the market, or create barriers to entry
for potential new competitors
Yield Pricing:
Hotels and airlines use yield pricing, by which they offer lower rates on
unsold inventory just before it expires