Algorithm marketing price calculation
Marketing calculation of prices (Fig. 36) - a logical sequence of steps, the first of which is to determine pricing purposes. Based on the mission and strategy of the company, the purpose of pricing could be:
- Now get profit (stable, one that is growing, minimal sufficient);
- Achieving, maintaining or increasing turnover (sales revenue, market share, number of units of goods sold);
- Access to new markets or segments;
- Victory in the competition;
- Survival (saving at least the minimum sales);
- Social compliance (ensuring affordability of goods to consumers).
The second phase examines limitations, ie factors that determine the possible range of variation in prices for a particular product (Fig. 37).
The system limits the pricing factor is the most important value, dynamics and elasticity of demand and supply of goods.
As you know, demand - the number of products which consumers are willing and can be purchased at this price in this market during the period. There are several key factors that determine the value of demand, prices, income level consumers, the price elasticity of demand and so on. The law of demand states that the market operates inverse relationship between price and quantity of goods that consumers buy. If the product is cheaper, it buy more (the so-called substitution effect). Graphically, this is shown in Fig. 38.
To the classical scheme of the law of demand, consumers often make their own adjustments. Thus, lower prices will not affect the value of real income of consumers (so-called income effect). Unlike the effect of replacing the income effect may lead to the fact that consumers buy relatively fewer goods, which become less expensive if you decide that this product is worse than other more expensive products, they can buy now that their real income has increased (as Giffen called effect).
Thus, the net effect of price changes depends on the relative magnitude and direction of the relative effects of substitution and income.
Accordingly, all products can be divided into the following categories:
-products standard quality when prices are declining - income and substitution effects act in the same direction, encouraging consumers to buy more goods;
-products poor quality when prices are falling, income effect encourages consumers to buy more, and the substitution effect - less (increased buying quality products). Typically, the substitution effect is stronger, but because consumers are not buying more of these goods when the price is falling;
- So-called Giffen goods. This type of goods uncommon. They exist only where such a product accounts for a significant share BASED (expenditures of consumers. For example, in the East with low industrial development of this product is rice. If a person spends 90% of their income for this product, but only 10% - other foods, such as meat, the decline in rice prices by 10% leads to an increase in real income by 9%. then the man increased meat consumption, enabling it to reduce the consumption of rice. on the contrary, in the case of price increase rice 10% of people do not allow themselves to buy meat and therefore must maximize procurement of rice.
If- demand is inelastic, ie reduced by the increase in income (poor quality products). With the demand is elastic, ie one that is increasing with the growth of income (high quality products).
The main factors that determine the price elasticity of demand is:
- Substitutability of goods: the more substitutes goods, the elastic is demand for it;
- The share of goods in the income of consumers: the important place the product in the consumer's budget, the higher elasticity of demand for it;
- Goods belonging to the luxuries or necessities: the closer to essential goods, the less elastic is the demand for it;
- The time factor, the elasticity of demand for the product depends on the length of time required for a decision as to the change of prices changing habits and tastes of consumers.
The offering - a quantity that producers are ready and willing to make and offer at this price in the market for a specific time. Offering law states that manufacturers deem appropriate to direct more resources to the production of the product at a relatively higher level of prices for it. Changing the volume of offerings can occur due to changes in conditions of production and supply of goods on the market, namely:
- Price changes the elements of production (wages and salaries, the cost of production): the higher the prices, the less offerings, because they directly affect the cost;
- Number of companies: what they more, offering great volumes;
- The level of technology, it is more perfect, the more offerings;
- The price of goods: what it is higher, the more offerings.
In addition to offering demand and factors that shape the specific situation in pricing and exploring for price developments are:
- The state of the monetary sphere: the greater purchasing power of money and the favorable exchange rate, the greater the possibility of raising prices, they are of multiple;
- Social costs of production: the lower the social costs of production and the average income is greater range of possible changes in prices;
- The state of competition: the more the share price competition, the less possibility of raising prices;
- Social and public policy of price regulation, which is such a powerful system, the less the possibility of an excessively high prices;
- Monopoly regulation of prices, the higher its measure, the non-perfect in terms of marketing ideas are pricing;
- Quality and novelty of the product: they are higher, it should be more careful calculation of prices;
- Shipments: what they are, the lower the price may be;
- The relationship between buyer and seller, they are longer, the moderate price;
- Delivery terms if they are favorable to the buyer, the price will be higher;
- The number of buyers and sellers, their more difficult it is to change the price.
The next stage of marketing development is costing price on production and sales.
These costs are divided into the following types:
permanent (fixed) - do not change depending on the volume of production (wages of management personnel, depreciation, insurance premiums, etc.);
variables - vary depending on the volume of production (cost of raw materials, fuel, wages, etc.)
full (total value) - the sum of fixed and variable costs;
average (unit), including fixed, variable, full, the cost per unit of production;
margin - increase (decrease) the full costs for the corresponding increase (decrease) in output per unit of output.
If the analysis of the factors tsinoutvoryuvalnyh lets you set maximum limits of commodity prices, the cost analysis - their minimum values. When prices are below cost, the company will have profits.
Then comes the stage of establishing approximately equal
prices. This is done by analyzing the real prices of competing products. Sources of information for this analysis is comparative purchasing competing products, participation in exhibitions, fairs, study booklets, catalogs, the relevant expert evaluations, surveys of consumers.
The final stage of the marketing price calculation algorithm is the choice of method or methods for pricing and immediate calculation of prices.