In a general sense the most critical thing to analyze is the price point that maximizes overall profit. This requires knowledge of the elasticity of demand and the cost structure for procurement and / or manufacturing. A luxury car manufacturer will therefore have a very different pricing strategy than a wheat grower because the price elasticities will be very different.
In specific situations to gain market share and scale advantage, a company might choose to price a product lower than its optimal profit point in order to establish in the market. Hence, the concept of the introductory price.
December 30th, 2009 at 12:40 am
In a general sense the most critical thing to analyze is the price point that maximizes overall profit. This requires knowledge of the elasticity of demand and the cost structure for procurement and / or manufacturing. A luxury car manufacturer will therefore have a very different pricing strategy than a wheat grower because the price elasticities will be very different.
In specific situations to gain market share and scale advantage, a company might choose to price a product lower than its optimal profit point in order to establish in the market. Hence, the concept of the introductory price.
References :
December 30th, 2009 at 1:23 am
Knowledge of the marketplace is critical. If there are options or competitors, what do they charge? Of course knowing what the total cost of a product is necessary to determine the level of profitability, but selling at the maximum logical price is a better strategy.
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