Approach to pricing changes if the goods are part of product range. In this case the firm seeks to develop system of the prices which would provide the maximum profit according to the nomenclature in general. Calculation of the prices is complicated by that different goods are interconnected with each other from the point of view of demand and costs and face different extent of competitive counteraction. Let's consider four situations.
The firm is not always able to carry out the analysis of options of the actions directly at the time of the change in price. After all the competitor, perhaps, prepared for the step long enough, and accurately it is necessary to react to this step in some hours or days. Almost only way to reduce the term of making decision on response - to expect possible price maneuvers of the competitor and beforehand to prepare countermeasures.
To achieve such situation, it is necessary to make as much as possible difficult introduction on this sales market of new competitors. For this purpose it is necessary to care not only of decrease in costs, improvement of quality of production, but also to carry out vigorous innovative activity. All these factors together taken do too high for the enterprise outsider which before was not working for this market, costs for its development.
Gross costs represent the sum of constants and variable costs at each concrete level of production. The management seeks to raise such price which at least would cover all gross costs of production for goods.
Such technique of pricing is based on graphics of profitability. On it joint costs and the expected general receipts at different levels of sales volume are presented. The hypothetical schedule is shown in figure 41:
Other firms want to be leaders in indicators of a share of the market for a reason that the company which possesses the biggest share of the market, will have the lowest costs and the highest long-term profits. Achieving leadership in indicators of a share of the market, they reduce the greatest possible prices. Option of this purpose is the aspiration to achieve a concrete increment of a share of the market.
The discount is offered by cash to the consumers buying goods from dealers in a certain interval of time. This flexible tool of reduction of commodity stocks during the periods of difficulty of sale without decrease in list prices.
The firm not simply quotes this or that price, she creates the whole system of pricing covering different goods and products within the commodity range and considering distinctions in costs for the organization of sale in different geographical regions, distinctions in levels of demand, distribution of purchases on time and other factors. Besides, the firm works in the conditions of constantly changing competitive environment and sometimes itself acts as the initiator of the change in price, and sometimes answers price initiatives of competitors.
Producers offer functional discounts to the services of merchandising which are carrying out certain functions on sale of goods, its storage, maintaining the account. The producer can offer different trade discounts to different trade channels as they render him services, different in character, but he is obliged to offer a uniform discount to all services which are a part of the certain canal.
Such approach is usually applied to products of mass demand when they are addressed to rather big groups of consumers. Conditions of the market competition are characterized by high sensitivity (elasticity) of a consumer demand for the change in price here. Therefore drop in prices - a certain way to draw attention of consumers to the production.