1000 Business Lessons Every Businessman Must Know

Chapter 23: Price Decision: Plays an Important Role in Business Success (2)
1. Analyze the competitive position of the enterprise
The competitive position of the enterprise and its products in the market is of great significance to the final price setting, and a basic estimate should be made in terms of the main market and competitiveness of the enterprise.List the current situation of the enterprise, and consider the significant non-commodity competitiveness in the analysis process, such as service quality, channel status, pricing method, etc.

2. Coordinate the pricing direction of the enterprise

Enterprises should learn about competitors' product prices through various publicly released financial or other materials, or from price lists requested by shoppers, so as to make their price setting more active.This aspect of work should take into account the pricing objectives and main strategies of competing companies.

3. Estimate the response of competing firms

Enterprises should arrange the prices and strategies that may be adopted soon, conduct trial analysis, estimate and predict the reactions of major competitors and peers that may be caused by the adoption of certain specific prices and strategies.The company's marketing intelligence information system should provide information about competing companies, such as financial, technical, and management advantages and disadvantages, the strengths and weaknesses of non-price factors, current marketing strategies, and historical data on responses to competition. Relevant decision-makers know themselves and their enemies in order to formulate corresponding strategies and adopt appropriate methods.

182. Step Five: Choose a Pricing Method
The selection of enterprise pricing method is the concrete embodiment of the first four steps.There are three commonly used pricing methods.

1. Cost-plus pricing method

The cost-plus pricing method is a cost-centered pricing method, and it is also the most traditional and common pricing method.The specific method is to set the price according to the product cost plus a certain profit. For example, the production enterprise bases the price on the production cost, and the commercial retail enterprise bases it on the purchase cost.The advantage of this method is that the price set can ensure that all costs of the enterprise are compensated, and the cost materials of the enterprise are mastered by themselves, which is convenient for calculation. The impression of “seeking capital for profit”.Its disadvantage is that it cannot reflect the market demand situation.Cost plus method includes full cost plus method and marginal cost plus method.

2. Competition-oriented pricing method

Competition-oriented pricing is a pricing method centered on competition and based on competitors' pricing.Here is a brief introduction to several pricing methods: follow-the-market pricing method, which means that enterprises set prices according to the price level of enterprises in the same industry; follow-up pricing method, which means that enterprises set their commodity prices based on the prices of leading enterprises in the same industry; break-even pricing method , is a cost-guaranteed pricing method implemented using the principle of profit and loss balance.

3. Demand-based pricing
The demand-oriented pricing method is an enterprise pricing method centered on the needs of consumers.It is not based on the cost of the product, nor is it simply considering the competitive situation of enterprise pricing, but on the basis of the intensity of consumer demand for commodities and the degree of awareness of the value of commodities to formulate corporate prices.There are two main types: one is that enterprises set prices based on buyers’ or consumers’ knowledge and feelings about commodities and their prices. This pricing method requires enterprises to understand consumers’ judgments on the value of commodities; Differential pricing due to differences in demand.The reason why this pricing method can be implemented is that in real life, consumers have different demands for the same product, and their demand elasticity is different.

183. Step Six: Determine the Final Price

Determining the final price is the last step in the company's pricing.When finalizing the price, it is necessary to consider whether the following four principles are followed:

(1) The formulation of commodity prices is consistent with the expected pricing target of the enterprise, which is conducive to the realization of the overall strategic goal of the enterprise;
(2) The formulation of commodity prices complies with the relevant provisions of national policies and decrees;
(3) The formulation of commodity prices is in line with the overall and long-term interests of consumers;

(4) The formulation of commodity prices and the non-price factors in the enterprise's marketing mix are coordinated and cooperate with each other to serve the enterprise's marketing goals.

[-]. Pricing method
184. New Product Pricing: A High-Pricing Strategy
This strategy is also known as the skimming price strategy.This is a strategy adopted by manufacturers for their new products with high efficiency and high quality.

People's consumption structure and demand are determined by their income level.High-income classes are often interested in high-quality, high-efficiency new products.Some companies take this part of consumers as their target customer group, and take advantage of the fact that the high-income class is willing to pay a higher price than others to buy products of great real value to them, and set a relatively high price, so as to To obtain high profits, after the needs of the high-income class are met, the sales price will be gradually reduced.

Not all commodities can implement the high price strategy, the basic conditions it needs to meet are:
(1) The product is unique and has superior performance.

(2) It has a high-grade and luxurious appearance, which can meet the psychological needs of high-income consumers.

(3) The imitability of the product is weak, either because the product is self-developed in terms of technology and process, has applied for a patent, and strictly controls the transfer of production technology and process to the outside world, or because the product produced requires a large amount of investment , the construction period is long, or there are strict restrictions on resource environment and personnel requirements.

(4) There are no substitutes.

(5) The price elasticity of demand is very small.

185. New Product Pricing: Low Price Penetration Strategy

The low-price penetration strategy is to set commodity prices at a relatively low level, so that new products can enter the market quickly, gain the initiative in the market, and maximize long-term profits.

The general conditions for commodities suitable for this strategy are:

(1) The price elasticity of demand for commodities is relatively large, and there are many related substitutes. Lowering prices can promote sales growth.

(2) The commodity production capacity of the enterprise is relatively large, and after mass production, the cost can be greatly reduced.

Utilizing the above two characteristics, through small profits but quick turnover, open up market outlets, prevent competitors from entering the market, and control the market to the greatest extent.But adopting this strategy, due to the low price and profit, it takes a long time to recover the investment cost of the enterprise, which requires the enterprise to have strong financial backing; on the other hand, it is not conducive to the establishment of the brand image of the enterprise, especially for those whose quality is not easy to identify For commodities, consumers often doubt the quality of commodities due to low prices, which affects sales.Nevertheless, the implementation of low-price strategy is more acceptable to the majority of consumers.Therefore, companies should pay attention to two aspects when adopting this strategy:
The first is to implement a low-price strategy, which does not mean implementing a low-quality strategy. Enterprises must also have quality assurance and service assurance to truly make consumers feel safe and make products "high quality and low price" for the general public.

The second is to implement the low-price policy from an overall point of view to ensure that the total profit is maximized.

186. New Product Pricing: A Middle Way Strategy
The middle route strategy, also known as the satisfactory price strategy, means that the enterprise sets the product price between high price and low price, taking into account the interests of producers and consumers, so that both can get satisfactory price strategy.The purpose of implementing this strategy is to obtain average profits in the long-term stable growth.Therefore, this strategy is valued by the majority of enterprises.

Although the mid-price strategy can avoid the risks brought by the high-price strategy, and can also prevent the troubles caused by the low-price strategy to the producers and operators, concentrating the advantages of both, it is more difficult to implement, mainly because:
First, with the continuous maturity of production technology and continuous expansion of production scale, before the production scale reaches the economic scale, the unit product cost will continue to decrease with the passage of time, and the price will also change constantly, and the middle price level is not easy to determine.

The second is that new products, especially brand new products, appear on the market for the first time, and the price has no reference to compare with.

It can be seen that it is difficult to set a moderate price for new products in the initial stage.The usual practice is: if there is little difference between the new product and the old product, the moderate price of the new product can be set with reference to the price of the old product, or it can be set with reference to the price of the substitute, or the middle income can be determined by dividing different income levels. The level is formulated as a standard, or the appropriate price is selected for trial sales first, and then adjusted to determine the price.

187. Commodity Stage Pricing Strategy
All kinds of commodities generally have common characteristics at a certain stage of their economic life cycle, but due to the nature and characteristics of various commodities and their importance in the national economy and people's livelihood, as well as the different market supply and demand conditions, the pricing strategies adopted for commodities with different needs Also be realistic and flexible.

1. Introduce period pricing strategy

Generally, you can refer to the pricing strategy of new products, and adopt higher or lower prices for new products (or old products that have been improved).

2. Growth period pricing strategy

Consumers accept the product and the sales volume increases, so they generally do not cut prices hastily.However, if the price of the product is relatively high when it enters the market, and a strong competitor appears in the market, the company can also lower the price appropriately in order to quickly increase its market share.

3. Mature pricing strategy

The number of consumers and sales volume have reached the highest level and began to show a downward trend. The market competition is relatively fierce, and it is generally advisable to adopt a price reduction sales strategy.But if there are few competitors, the original price can be maintained.

4. Pricing strategy during recession

Consumer interest has shifted, and sales volume has dropped sharply. Generally, it is advisable to adopt a decisive price reduction sales strategy, and sometimes the sales price is lower than the cost.However, if competitors in the same industry have already withdrawn from the market, or if the commodities in operation have preservation value, the original price can be maintained or even increased.

188. Commonly used discount price concession strategies

The discount price strategy is also called "discount price strategy", which is a common strategy used by companies to mobilize the enthusiasm of all parties or encourage customers to make purchases that are beneficial to the company.It is often used between manufacturers and wholesale enterprises, between wholesale and wholesale, and between wholesale and retail or between wholesale and retail enterprises and consumers.There are four common types:
1. Quantity discount
Also known as volume discounts.That is, different discounts are given according to the size of the buyer's purchase quantity.Among them, "one-time discount" means that the enterprise will give different discounts according to the size of the purchase quantity in order to encourage buyers to purchase more goods; The quantity purchased by the enterprise is summed up, and different discounts are given according to the cumulative purchase quantity.

2. Seasonal discounts
Also called seasonal spread.It is generally implemented in industries with obvious off-peak seasons.It is mainly to encourage buyers to purchase goods in the off-season, so as to reduce the pressure and burden on supply companies and reduce operating costs.

3. Cash discount
Also known as payment period discount.Its purpose is to encourage buyers to pay as soon as possible to accelerate the capital turnover of enterprises.It is very common for retail businesses to use this method.Buyers who pay in cash or in advance can enjoy a certain discount on the basis of the original commodity price.

4. Business discounts
Also called peer discount.It is the discount given by the manufacturer to wholesalers and retailers.The size of the discount varies according to the different functions of the intermediary enterprises in commodity circulation.The situation in different countries is also different. The business discount in our country is reflected in the price difference between the purchase and sale of different industries and different varieties of commodities by various competent departments.

189. Pricing according to consumer psychology

Psychological pricing strategy is a strategy to formulate corresponding commodity prices according to different consumption psychology of different consumers to meet the needs of different types of consumers.

Psychological pricing strategies mainly include the following:
1. Mantissa pricing strategy
The mantissa pricing strategy refers to a price strategy in which the company intentionally sets a price that has a certain difference from the integer, so that customers will have a psychological illusion and thus promote purchases.

Many retail companies have discovered an interesting phenomenon in their sales practice. Consumers tend to prefer commodity prices with mantissas.The same product with a price of 29.99 yuan or a price of 30.17 yuan sells better than a price of 30.00 yuan.In the eyes of most consumers, the price with a mantissa reflects the price of the commodity more accurately, giving people the feeling of genuine goods at a fair price.Later, experts who studied consumer psychology further discovered that consumers not only like products with labels that end in numbers, but also products that end in odd numbers. There is an illusion of being cheaper, so this pricing method is specifically called the odd-numbered pricing method in marketing.To obtain the maximum profit by adopting odd-numbered pricing, it is necessary to choose the largest odd number "9".Therefore, in many chain supermarkets and warehouse-style shopping malls, a large number of commodities with prices ending in 9 appear.

2. Integer Pricing Strategy
Contrary to pricing with mantissas, integer pricing is to deliberately set the price of a product as an integer to show the high-end of the product. At this time, if the price of the product has a mantissa, it will make consumers feel that it is "low price" and loses its identity.This is a pricing strategy for customers seeking fame or self-esteem.

3. Prestige Pricing Strategy
This is a further development of the integer pricing strategy.Consumers generally have a reputation-seeking psychology. According to this psychological behavior, companies will set a higher price for prestige products than similar products in the market, which is the prestige pricing strategy. It can effectively eliminate psychological barriers to purchase and make customers A sense of trust and security is formed for commodities or retailers, and customers also get a sense of honor from it.

4. Customary pricing strategy

For some commodities, their value is not high, but consumers must buy them frequently and repeatedly. Therefore, the prices of such commodities are "habitually" accepted by consumers.Enterprises should fully consider the habitual tendency of consumers when pricing such commodities, and should not change prices at will, and should set prices in accordance with the prices of similar commodities in the market.Otherwise, once the long-term consumption habits of consumers are destroyed, it will cause dissatisfaction and lead to the transfer of purchases.If it is necessary to adjust the price, publicity should be done in advance to let customers fully understand the reasons for the price adjustment.

5. Minimum unit pricing strategy

It means that the enterprise packs the same commodity in different quantities, sets the base price based on the smallest packaging unit, and collects payment with reference to the base price of the smallest packaging unit and the purchased quantity when selling.Generally, the smaller the package, the higher the actual unit price of the product; the larger the package, the lower the actual unit price of the product.

(End of this chapter)