How to Fixing product and service prices ?
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Written by: decey
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Date: Tue, 15 Dec 2009 |
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Fixing product and service prices is a very important activity in every type of organization, since the ultimate aim of all of these organizations is to earn maximum profit. Turnover and the profit Margin on each unit determine the overall profit of an organization. Usually, prices are fixed by taking into account the entire cost of acquiring or manufacturing a product and then adding a margin to that total cost. The higher the margin of profit, the higher will be the price of the product.
The demand and supply of a product are also factors that determine the price. Surplus stock brings prices down, while scarcity makes it shoot up. When the seller wishes to have high profits, he should be careful that he does not frighten away buyers. The prices should be kept uniformly as much as possible, taking into consideration market changes. Circumstances should also not be misused. For example, if there seems to be a chance of higher sales, the prices should not be hiked to such an extent that buyers will go elsewhere. In some cases, it is the quantity of the sale that gives higher profits. In this case (like the telecom industry), prices can be marginally reduced in order to attract the customers of competitors, and thus get a higher profit.
How to Fixing product and service prices ? There are some instances in which buyers view high prices as a status symbol. Some examples are bridal wrist watches, where, since the product was for a special occasion, the prices were also “special” – meaning, higher. This is because people would want to purchase these watches only once in a life time so they would be able to afford it.
Prices should be valid, ethical and morally correct. It should also be conducive to the growth of the business. This will ensure a good and loyal customer base, as well as boost the organization’s profits.
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