The purpose of pricing according to experts

The purpose of pricing according to experts. One of the most difficult decisions a company faces is to set a price. Although the pricing method used is the same for every company, which is based on cost, competition, demand, and profit. 

However, the optimal combination of these factors differs according to the nature of the product, its market, and the company’s goals.

1. According to Ricky W. and Ronald J. Ebert

Stated that: “Setting the selling price is the process of determining what a company will receive in selling its products”. Companies set prices in various ways. In small companies prices are usually set by top management rather than by marketing.

Whereas in large companies pricing is usually handled by divisional and product line managers. Even here top management also sets goals and general pricing policies and gives approval to price proposals from management below.

2. Mulyadi’s opinion

Mulyadi in his book states that: “In principle, the selling price must be able to cover full costs plus a reasonable profit. The selling price equals the cost of production plus markup.

In addition, Hansen & Mowen stated that “The selling price is the monetary amount charged by a business unit to buyers or customers for goods or services sold or delivered”.

From the definition above it can be concluded that the selling price is the amount of costs incurred by the company to produce a good or service plus the percentage of profit that the company wants.

Therefore, to achieve the profit desired by the company, one of the ways to attract consumer interest is to determine the right price for the product being sold. The right price is the price that is in accordance with the product quality of an item, and this price can provide satisfaction to consumers.

3. Boyd, Walker, and Larreche

In his book entitled Marketing Management states that: There are a number of ways to set prices, regardless of which method is used, situational factors should be taken into account. These factors include:

  • Corporate strategy and other components in the marketing mix.
  • Product extension in such a way that the product is seen as different from other competing products in terms of quality or level of customer service.
  • Competitor costs and prices.
  • Availability and price of substitute products.

4. According to Philip Kotler

In his book entitled Marketing Management in Indonesia states that: “Pricing is a problem if the company will set prices for the first time.

This occurs when a company develops or acquires a new product, when it introduces its product to a new distribution channel or a new area, when it bids on a new work agreement.

This definition explains that every company must decide where it will place its product based on quality and price. In some markets, such as the auto market, as many as eight price points can be found.

The selling price is one of the factors that influence the consumer’s decision to buy a product, consumers will buy a product if there is a balance between the reasons for setting the selling price.

5. Sudarsono states

The purpose of pricing according to experts. That “In setting the selling price, several things need to be considered, including: (a) cost of goods sold, (b) prices of similar goods, (c) people’s purchasing power, (d) capital turnover period, (e) regulations etc”.

These factors are objective factors. This means that the personal income of entrepreneurs or traders does not play a role, or even if there is only a very small amount. These objective factors are sometimes not strong enough to be used as a basis for determining prices, so there are subjective consideration factors.

A. Setting prices according to Kotler 1996

In carrying out price fixing, based on the opinion of Kotler 1996, producers must pay attention to the following matters:

a. Competitive product prices:

In determining the price, we should know the prices of competitors in the market (price awareness) and the prices given to consumers. Usually the price circulating in the market is different from the price given to the customer.

This is due to competitive strategy and other aspects between competitors and customers. For this reason, field research is needed in the form of quantitative research and assisted by marketing intelligence.

Factors in Pricing (photo/special)
Factors in Pricing (photo/special)

b. The elasticity of demand and the amount of demand

The purpose of pricing according to experts. What is meant by elastic here is to find out how much change in demand is caused by changes in prices. Besides that, it is also a very necessary consumer response to price changes associated with the use of the product itself.

For example, with a decrease in price, consumers will buy more or not buy, and vice versa. While other factors needed are large Value is low price, Discounting, Odd pricing, Synchro pricing, penetration Pricing, Value is everything I want in a service Prestige pricing, Skimming pricing, Value is all that I get for all that I give Price framing , Price bundling, Value is the quality I get for the price I pay, Value Pricing, Market Segmentation pricing, The picture above. Price Value (Sumber : Service Marketing, 1996). 

c. Product Differentiation and Life Cycle.

In winning the market for a product, of course, a difference is needed from competitors’ products. For this reason, it is very necessary to understand the differences between competitors in terms of quality, service and other factors.

In addition, you must know the position of the product associated with the time and amount of sales. With the introduction and understanding of product conditions, it will be easier for producers and free to determine tariffs.

d. other factors.

Understanding current economic conditions and forecasts that will occur in the future is the main key in efforts to determine people’s purchasing power, as well as predicting political and security conditions.

B. Alternative set prices

The purpose of pricing according to experts. In setting prices, producers can set several alternatives as below (Zeithaml & Bitner, 1996):

a. Cost-based pricing.

A pricing strategy that is the oldest, where prices are determined based on the total cost per unit product that comes out plus the expected profit.

b. Pricing is based on competitors’ prices

Pricing is determined by using competitors’ prices as a reference, which in practice is more suitable for standard products under oligopoly market conditions.

c. The price approach is based on demand (demand-based pricing).

The purpose of pricing according to experts. The price fixing process is based on consumer perceptions of the value received (price value), price sensitivity and perceived quality. To find out the value of price to quality, Price Sensitivity Meter (PSM) analysis is one form that can be used.

In this analysis consumers are asked to provide statements where consumers feel the price is cheap, too cheap, feels expensive and too expensive and is associated with the quality received.

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