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Costs
– While demand and competition are external factor,
the costs are internal. The costs must be embedded in
every stage of price determination process. There are
several methods of cost embedding into price:
1.)
Costs Plus – company calculates the costs and increase
price for the specific profit.
2.)
Markup – price based on cost increased for amount of
specific markup
percentage.
3.)
Target Return Method – calculated required markup, in
order to achieve return on investment.
4.)
Profit Maximizing is the price where the marginal profit
equals marginal cost.
5.)
Breakeven Analysis – is the number of units sold that
generates profit that can cover cost. This point does
not have profit nor lost.
Life
Cycle
pricing approach analysis the current phase of product
life in market.
1.)
Entering phase usually requires higher sales prices in
order to payback initial development costs. Also
customers are willing to pay more for a new product.
2.)
Growth phase is bringing the market stabilization.
Prices are more or less stabile.
3.)
Saturation phase leads to price decline, due to
competition entrance and loss of consumer's interest
4.)
Declining phase is the last part of product life cycle.
Prices are still going down.
Sales
Channels have the different shopping occasion.
Consequently the pricing is adjusted to sales channel.
For example, the same products is cheaper in hypermarket
than on petrol station.
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