Pricing policy at the enterprise. Pricing Policy

Introduction

In modern market conditions, the price of a product is the lever of the economic mechanism on which the successful development of an enterprise, its income and expenses, position relative to competitors, growth prospects and a number of other factors largely depend.

A carefully developed pricing policy is an important component of the company's functioning. Knowledge and management of the pricing mechanism, methods of setting and regulating prices for manufactured goods help determine the feasibility of achieving short-term and long-term financial and economic results entrepreneurial activity, the use of new pricing mechanisms is competitive advantage before other enterprises.

The purpose of this work is to determine the role and significance pricing policy enterprises, consideration of modern pricing mechanisms that meet market realities.

According to the modern concept of enterprise management, a special place in the functioning of the company is occupied by a reasonable pricing policy in relation to manufactured products and pricing strategies developed on its basis.

The main advantages of price as an essential element of competition policy, which has a direct impact on the development of the enterprise, its sustainability and prospects for further growth, are that:

It is faster and easier to change the price than, for example, to develop a new product, conduct an advertising campaign, or find new, more effective ways to distribute products;

The pricing policy of an enterprise instantly affects the business and its financial and economic results.

For this reason, especially close attention should be paid to the development of a pricing policy by the management of an enterprise that wants to most effectively develop its activities in the market, since any mistake or insufficiently thought-out action immediately affects the dynamics of sales and profitability.

The pricing policy of an enterprise can be considered as a multifaceted concept. An enterprise does not just set this or that price, it creates its own pricing system, which includes the entire range of products, which takes into account differences in production and sales costs for certain categories of consumers and for different geographical regions, and specific levels of demand; seasonality of product consumption and other factors.

In addition, the company's constantly changing competitive environment must be taken into account. Sometimes the company itself takes the initiative to change prices, but often it simply reacts to the actions of competitors

Pricing policy of the enterprise

Pricing policy is the most important mechanism that ensures many of the priorities of the economic development of an enterprise. It significantly affects the volume of operating activities of the enterprise, the formation of its image and the level of financial condition as a whole. Pricing policy is an effective tool for competition in the product market.

The company's pricing policy is an important element of the company's overall strategy, which is included in the market strategy and combines both strategic and tactical aspects. Policy is understood as the general positions that the organization intends to adhere to in the field of setting prices for its goods and services, and with the help of which it intends to achieve its main goals (further development of the organization, obtain maximum profit in a short time, increase turnover in a short time, improve product quality etc.).

The relevance of the study of this topic is determined by the fact that in a market economy, the commercial result of any organization largely depends on the correctly chosen pricing policy, that is, on the methods and strategies used at the enterprise.

Correct or incorrect pricing policy has a lasting impact on the entire operation of the enterprise’s production and sales complex. With various versions of the pricing policy, pricing work is carried out jointly with company departments that are responsible for assessing and forecasting product costs, financial results, and production and sales policy.

One of the main components of a market economy are prices, pricing, and pricing policy. Price is the monetary expression of the value of a product.

Previously, Russia was dominated by a system of stable, state-approved wholesale and retail prices. They didn't respond publicly necessary expenses labor. In 1991, after the start of market reforms, prices rose rapidly, increasingly approaching world prices for individual goods.

Correct pricing allows a company to:

1. Increase production efficiency;

2. Increase the competitiveness of the company and its services in the market;

3. Capture a wider market segment;

4. Increase the level of sustainability and stability of the company’s functioning in the market.

The essence of a targeted pricing policy is to introduce such prices for goods, to manage them in connection with market conditions in order to obtain its maximum possible share, achieve the target amount of profit and successfully solve all strategic and tactical tasks. Pricing policy represents the general goals of the organization, which it seeks to achieve by setting the price of its product.

The pricing policy corresponds to the short-term period of existence of the organization. The clearer an organization's understanding of its goals, the easier it is for it to set prices for its products.

Pricing in an organization is a difficult and multi-stage procedure. Let's consider the stages of the pricing process (Figure 1).

Each organization must first establish what goal it is pursuing by publishing a specific product. If the goals and position of the product on the market are precisely established, then it is simpler and easier to determine the price.

Definition of demand. It cannot be eliminated or delayed, since it is absolutely impossible to calculate the price without researching the demand for this product. However, it must be borne in mind that a high or low price determined by the organization immediately will not affect the demand for the product.

Figure 1 - Stages of the pricing process

Cost analysis. Demand for a product sets top level prices determined by the organization. Gross production costs (sum of fixed and variable costs) set the lowest price. It is important to take this into account when lowering prices if there is a real danger of incurring losses due to the fact that the price level was set lower than costs. An organization can pursue such a policy only during a short period of penetration into the market.

Analysis of competitors' prices. The behavior of competitors and the prices of their goods have a significant impact on the price. Any organization must know the prices of competitors' goods and the characteristics of their products. For this purpose, products from competing companies are purchased. Next, a comparative analysis of prices, products and their quality among competitors and this organization is carried out. The company is able to use the acquired data as input for pricing and establishing its place among competitors.

Selecting a pricing method and setting the final price. Having gone through all these stages, the organization has the opportunity to begin setting prices for products. The optimal possible price must fully reimburse all costs of manufacturing and selling products, and in addition guarantee a certain rate of profit.

There are 3 options for setting the price level:

minimum level, which is determined by costs;

maximum level based on demand;

optimal possible price level.

There are a number of factors that significantly influence the pricing process in an organization, creating certain boundaries within which the company can operate. First of all, these factors influence the degree of freedom of action of the organization in the sphere of setting prices for its own products.

When developing a pricing policy, it is important not only to determine the price level, but also to formulate a strategic line for the enterprise’s pricing behavior in the market. The pricing strategy serves as the basis for deciding the selling price in any given transaction.

The choice of pricing policy is determined both by the goals of the company and its size, financial condition, market position, and intensity of competition. Depending on these factors and their goals, firms apply different types pricing policy.

There are different types of pricing policies in marketing:

Cost-based pricing policy (setting prices by adding target profits to calculated production costs; setting prices with reimbursement of production costs). This is the easiest way to set your price.

This method is acceptable only if the price found with its help allows you to achieve the expected sales volume. This method, however, remains popular for a number of reasons.

First, sellers have a better idea of ​​their own costs than of the amount of demand. By linking prices to costs, sellers make it easier for sellers because this method does not require constant price adjustments in response to changes in demand.

Second, when all companies in an industry use this pricing method, prices are set at approximately the same level and price competition is minimized.

The high price pricing policy, or the “cream skimming” policy, involves selling goods initially at high prices, significantly higher than the production price, and then gradually reducing them. A pricing strategy that involves setting a high initial price for a new product to maximize profits from all market segments willing to pay the required price; provides less sales volume with more income per sale.

The use of this pricing policy is possible for new products, at the introduction stage, when the company first produces an expensive version of the product, and then begins to attract more and more new market segments, offering cheaper and simpler models to customers from various segments.

For a high price pricing policy, the following conditions are necessary:

• - high level of current demand from a large number of consumers;
• - the initial group of consumers purchasing the product is less sensitive to price than subsequent consumers;
• - unattractiveness of a high initial price for competitors;
• - the high price of a product is perceived by buyers as evidence of the high quality of the product;
• - the relatively low level of costs of small-scale production provides financial benefits for the enterprise.

The advantages of such a pricing policy include:

• - creating an image (image) of a quality product for the buyer as a result of a high initial price, which makes it easier to sell in the future when the price decreases;
• - ensuring a sufficiently large profit margin at relatively high costs in the initial period of product release;
• - facilitating changes in price levels, since buyers perceive price reductions more favorably than their increases.

The main disadvantages of this pricing policy are that its implementation is usually limited in time. A high price level encourages competitors to quickly create similar products or their substitutes. Therefore important task is to determine the moment when it is necessary to start reducing prices in order to suppress the activity of competitors, stay in the developed market and conquer its new segments.

This type of pricing policy practically prevails in the market. It is actively used when an enterprise takes a monopoly position in the production of a new product. Subsequently, when the market segment becomes saturated, analogous and competing products appear, the company reduces prices.

The pricing policy of low prices, or the policy of “penetration”, “breakthrough” into the market, suggests that the enterprise initially sets a relatively low price for its new product in the hope of attracting a large number of buyers and gaining a large market share.

Not all companies start by setting high prices for new products; most turn to market penetration. In order to quickly and deeply penetrate the market, i.e. quickly attract maximum amount buyers and gain a larger market share, they set a relatively low price for the new product. This method ensures a high level of sales, which leads to lower costs, allowing the company to further reduce prices. A company using such prices takes a certain risk, expecting that the growth in sales volume and income will cover the loss of profit due to a decrease in the price per unit of goods. This type of pricing policy is available to large firms with large production volumes, which makes it possible to compensate temporary losses on certain types of goods and market segments with the total amount of profit.

An enterprise achieves success in the market, displaces competitors, takes a certain monopoly position during the growth stage, and then raises prices for its goods. The following conditions favor the establishment of a low price:

• 1. the market is very price sensitive and low prices contribute to its expansion;
• 2. with an increase in production volume, production and circulation costs are reduced;
• 3. low price is not attractive to existing and potential customers.

Low price pricing is effective in markets with high elasticity of demand, when buyers are sensitive to price changes, so it is practically very difficult to increase prices, because this causes a negative consumer reaction. Therefore, an enterprise, having won a high market share, is recommended not to increase prices, but to leave them at the same low level. The enterprise is ready to reduce income per unit of production in order to obtain a large total profit due to the large volume of sales of low cost products, characteristic of producing goods in large quantities.

The pricing policy of differentiated prices is actively used in the trade practice of enterprises, which establishes a certain scale of possible discounts and surcharges to the average price level for different markets, their segments and customers. The differentiated pricing policy provides for seasonal discounts, for quantity, discounts for regular partners, etc.; establishment of different price levels and their ratio for various goods in the general range of manufactured products, as well as for each of their modifications.

Differential pricing takes several forms. Price differentiation by type of consumer means that different categories consumers pay different prices for the same product or service depending on their financial situation. Losses or shortfalls in profit from selling goods at low prices to less wealthy buyers are compensated by selling them at high prices to buyers whose level of wealth allows this. Museums, for example, give discounts to students and pensioners.

With price differentiation by type of product, different prices are assigned to different versions of the product, but the difference is not based on differences in the level of costs.

Price differentiation by location means that a company charges different prices for the same product in different regions, even if the costs of producing and selling them in these regions do not differ. For example, theaters charge different prices for different seats based on the preferences of the public.

With price differentiation by time, prices change depending on the season, month, day of the week and even time of day. Prices for utility services provided to commercial organizations vary depending on the time of day, and on weekends they are lower than on weekdays. Telephone companies offer reduced rates during night hours, and resorts offer seasonal discounts.

For differential pricing to be effective, certain conditions must exist:

• - the market must be segmentable, and the segments must differ in level of demand;
• - consumers of the segment that received a lower price should not be able to resell the product to consumers of other segments where the price is higher;
• - in the segment to which the company offers a product at a higher price, there should be no competitors who could sell the same product cheaper;
• - costs associated with segmenting the market and monitoring its condition should not exceed the additional profit received due to the difference in prices for goods in different segments;
• - establishing differentiated prices must be legal.

The pricing policy of differentiated prices allows you to “encourage” or “punish” different buyers, stimulate or somewhat restrain the sales of various goods in different markets. Its varieties are pricing policies of preferential and discriminatory prices.

Pricing policy of preferential prices. Preferential prices are the lowest prices; as a rule, they are set below production costs and in this sense may constitute dumping prices. They are established for goods and for buyers in which the selling company has a certain interest. In addition, the policy of preferential prices can be carried out as a temporary measure to stimulate sales.

Discriminatory pricing policy. Discriminatory prices are used in relation to incompetent buyers who are not oriented in the market situation, buyers who are extremely interested in purchasing goods, as well as when pursuing a policy of price cartelization (concluding an agreement on prices between enterprises).

Uniform pricing policy - establishing a single price for all consumers. It is easy to use, convenient, and builds consumer confidence.

The pricing policy of flexible, elastic prices provides for price changes depending on the buyer’s ability to bargain and his purchasing power.

The pricing policy of stable, unchanging prices provides for the sale of goods at constant prices over a long period. Typical for mass sales of homogeneous goods (price of transport, candy, magazines, etc.).

The leader's pricing policy provides either for the enterprise's correlation of its price level with the movement and nature of the prices of the enterprise - the leader in a given market, i.e. If the leader changes the price, the enterprise also makes corresponding changes in the prices of its goods.

The pricing policy of competitive prices is associated with the implementation of an aggressive pricing policy of competing enterprises with a reduction in prices and implies for a given enterprise the possibility of implementing two types of pricing policies in order to strengthen the monopoly position in the market and expand the market share, as well as in order to maintain the rate of profit from sales.

One of the important elements of the marketing mix is ​​price. Price is an economic category, and pricing is the process of setting prices for goods and services. In market conditions, pricing is influenced by many factors: consumers, government, distribution channel participants, competitors, costs. The practices of specific organizations are decided difficult questions formation of prices for goods and services. There are various types of pricing policies used in marketing, which include: high-price pricing, or “cream skimming” pricing policy, low-price pricing policy, or “penetration”, “breakthrough” pricing policy, differentiated pricing pricing policy, preferential pricing policy , pricing policy of discriminatory prices, pricing policy of uniform prices, pricing policy of flexible, elastic prices and pricing policy of competitive prices.

Based on the results of the first chapter, we can conclude:

• 1. Prices are a thin, flexible instrument and at the same time a rather powerful lever for managing the economy. Price formation is based on the addition of production costs (cost), actually incurred by the entrepreneur to produce a particular product (work, service), and the minimum acceptable profit from his point of view.
• 2. Pricing is the process of setting prices for goods and services. There are two main pricing systems: market pricing, which operates on the basis of the interaction of supply and demand, and centralized state pricing - the formation of prices by government agencies. At the same time, within the framework of cost pricing, the basis for price formation is production and distribution costs.
• 3. The pricing methodology is the same for all levels of pricing and on its basis a pricing strategy is developed. The basic provisions and rules for pricing should not change depending on who sets them and for what period, and this is a necessary prerequisite for creating a unified price system.
• 4. The pricing policy of an enterprise is determined primarily by its own potential, technical base, availability of sufficient capital, qualified personnel, modern, advanced organization of production, and not only by the state of supply and demand in the market. Even the existing demand must be met at a certain time, in the required volume, in a specific place and while ensuring the appropriate quality of goods (services) and prices acceptable to the consumer. The basis of such activities in the field of pricing is determining the purpose and strategic line of development of the enterprise.

Pricing in an enterprise is a complex process consisting of several interrelated stages: collection and systematic analysis of market information.

Justification of the main goals of the enterprise's pricing policy for a certain period of time, the choice of pricing methods, the establishment of a specific price level and the formation of a system of discounts and price premiums, adjustments to the pricing behavior of the enterprise depending on the prevailing market conditions.

Pricing policy is a mechanism or model for making decisions about the behavior of an enterprise in the main types of markets to achieve its business goals.

Objectives and mechanism for developing pricing policy.

The enterprise independently determines the scheme for developing a pricing policy based on the goals and objectives of the company’s development, organizational structure and management methods, established traditions at the enterprise, the level of production costs and other internal factors, as well as the state and development of the business environment, i.e. external factors.

When developing a pricing policy, the following issues are usually resolved:

in what cases it is necessary to use a pricing policy when developing;

when it is necessary to respond with price to the market policies of competitors;

what pricing policy measures should accompany the introduction of a new product to the market;

for which products from the assortment sold need to change prices;

in which markets it is necessary to carry out an active pricing policy and change the pricing strategy;

how to distribute certain price changes over time;

what pricing measures can improve sales efficiency;

how to take into account the existing internal and external restrictions on business activity in the pricing policy and a number of others.

Setting pricing policy goals.

At the initial stage of developing a pricing policy, an enterprise needs to decide exactly what economic goals it seeks to achieve by producing a specific product. Typically, there are three main goals of pricing policy: ensuring sales (survival), maximizing profits, and retaining the market.

Ensuring sales (survival) - the main objective enterprises operating in conditions of fierce competition, when there are many manufacturers of similar goods on the market. The choice of this goal is possible in cases where consumer demand is price elastic, as well as in cases where the enterprise sets the goal of achieving maximum growth in sales volume and increasing total profit by slightly reducing income from each unit of goods. An enterprise may proceed from the assumption that an increase in sales volume will reduce the relative costs of production and sales, which makes it possible to increase sales of products. For this purpose, the company lowers prices - it uses so-called penetration prices - specially reduced prices that help expand sales and capture a large market share.

Setting a profit maximization goal means that the company seeks to maximize current profits. It evaluates demand and costs at different price levels and selects the price that will maximize cost recovery.

The goal of maintaining the market involves maintaining the enterprise's existing position in the market or favorable conditions for its activities, which requires taking various measures to prevent a decline in sales and intensification of competition.

The above pricing policy objectives are usually long-term, intended to cover a relatively long period of time. In addition to long-term goals, an enterprise can also set short-term pricing policy goals. Typically these include the following:

stabilization of the market situation;

reducing the impact of price changes on demand;

maintaining existing price leadership;

limiting potential competition;

improving the image of an enterprise or product;

promotion of sales of those goods that occupy weak positions in the market, etc.

Patterns of demand. Studying the patterns of demand formation for a manufactured product is an important stage in the development of an enterprise’s pricing policy. Demand patterns are analyzed using supply and demand curves, as well as price elasticity coefficients.

The less elastic the demand is, the higher the price the seller of the product can set. And vice versa, the more elastic the demand is, the more reason there is to use a policy of reducing prices for manufactured products, since this leads to an increase in sales volumes, and consequently, the income of the enterprise.

Prices calculated taking into account the price elasticity of demand can be considered as an upper bound on price.

To assess the sensitivity of consumers to prices, other methods are used to determine the psychological, aesthetic and other preferences of buyers that influence the formation of demand for a particular product.

Cost estimation. To implement a well-thought-out pricing policy, it is necessary to analyze the level and structure of costs, estimate the average costs per unit of production, compare them with the planned production volume and existing prices on the market. If there are several competing enterprises in the market, then it is necessary to compare the enterprise's costs with the costs of its main competitors. Production costs form the lower limit of price. They determine the capabilities of the enterprise in the field of price changes in competition. The price cannot fall below a certain limit that reflects production costs and an acceptable level of profit for the enterprise, otherwise production is economically unprofitable.

Analysis of prices and products of competitors. The difference between the upper limit of price, determined by effective demand, and the lower limit, formed by costs, is sometimes called the entrepreneur's playing field for setting prices. It is in this interval that the specific price for a particular product produced by the enterprise is usually set.

The price level set must be comparable to the prices and quality of similar or similar goods.

By studying competitors' products, their price catalogs, and interviewing customers, an enterprise must objectively assess its position in the market and, on this basis, adjust product prices. Prices may be higher than those of competitors if the product produced is superior to them in terms of quality characteristics, and vice versa, if the consumer properties of the product are inferior to the corresponding characteristics of competitors' products, then prices should be lower. If the product offered by an enterprise is similar to the products of its main competitors, then its price will be close to the prices of competitors’ products.

Pricing strategy of the enterprise.

The enterprise develops a pricing strategy based on the characteristics of the product, the possibility of changing prices and production conditions (costs), the market situation, and the relationship between supply and demand.

An enterprise can choose a passive pricing strategy, following the “price leader” or the bulk of producers in the market, or try to implement an active pricing strategy that primarily takes into account its own interests. The choice of pricing strategy, in addition, largely depends on whether the company is offering a new, modified or traditional product on the market.

When releasing a new product, an enterprise usually chooses one of the following pricing strategies.

“Skimming” strategy. Its essence lies in the fact that from the very beginning of the appearance of a new product on the market, the highest possible price is set for it based on the consumer who is ready to buy the product at that price. Price reductions take place after the first wave of demand subsides. This allows you to expand the sales area and attract new customers.

This pricing strategy has a number of advantages:

a high price makes it easy to correct an error in price, since buyers are more favorable to a price reduction than to an increase;

high price provides enough big size profits at relatively high costs in the first period of product release;

the increased price allows you to restrain consumer demand, which has certain meaning, since at a lower price the enterprise would not be able to fully satisfy the needs of the market due to the limitations of its production capabilities;

a high initial price helps to create an image of a quality product among buyers, which can facilitate its sale in the future when the price decreases;

an increased price increases demand in the case of a prestigious product.

The main disadvantage of this pricing strategy is that a high price attracts competitors - potential manufacturers of similar goods. The skimming strategy is most effective when competition is somewhat limited. A condition for success is also the presence of sufficient demand.

Market penetration (implementation) strategy. To attract the maximum number of buyers, the company sets a significantly lower price than market prices for similar products from competitors. This gives him the opportunity to attract the maximum number of buyers and helps him conquer the market. However, this strategy is used only in the case where large production volumes make it possible to compensate for its losses on an individual product with the total amount of profit. The implementation of such a strategy requires great material costs, which small and medium-sized firms cannot afford, since they do not have the ability to quickly expand production. The strategy is effective when demand is elastic, as well as when an increase in production volumes ensures a reduction in costs.

The psychological price strategy is based on setting a price that takes into account the psychology of buyers and the characteristics of their price perception. Usually the price is set at just below a round sum, which gives the buyer the impression of being very precise definition production costs and the impossibility of deception, a lower price, a concession to the buyer and a win for him. The psychological point that buyers like to receive change is also taken into account. In fact, the seller wins due to an increase in the number of products sold and, accordingly, the amount of profit received.

The strategy of following the leader in an industry or market involves setting the price of a product based on the price offered by the main competitor, usually the leading firm in the industry, the enterprise that dominates the market.

A neutral pricing strategy is based on the fact that the price of a new product is determined based on the actual costs of its production, including the average rate of profit in the market or industry.

The prestige pricing strategy is based on setting high prices for very high quality products with unique properties.

The choice of one of the listed strategies is carried out by the management of the enterprise depending on the target number of factors:

speed of introduction of a new product to the market;

share of the sales market controlled by this company;

the nature of the product being sold (degree of novelty, interchangeability with other products, etc.);

payback period for capital investments;

specific market conditions (degree of monopolization, price elasticity of demand, range of consumers);

the position of the company in the relevant industry (financial situation, connections with other manufacturers, etc.).

Pricing strategies for goods sold on the market for a relatively long time can also focus on different types of prices.

The sliding price strategy assumes that the price is set almost directly depending on the relationship between supply and demand and gradually decreases as the market becomes saturated (especially the wholesale price, but the retail price can be relatively stable). This approach to setting prices is most often used for consumer products. In this case, prices and production volumes of goods closely interact: the larger the production volume, the more opportunities the enterprise (firm) has to reduce production costs and, ultimately, prices. The given pricing strategy requires:

prevent a competitor from entering the market;

constantly care about improving product quality;

reduce production costs.

Long-term prices are set for consumer goods. It usually works long time and is weakly subject to change.

Prices in the consumer segment of the market are set for the same types of goods and services that are sold to different social groups with different income levels. Such prices can, for example, be set for various modifications of passenger cars, for air tickets, etc. It is important to ensure the correct price ratio for various products and services, which is a certain difficulty.

A flexible pricing strategy is based on prices that quickly respond to changes in supply and demand in the market. In particular, if there are strong fluctuations in supply and demand in a relatively short time, then the use of this type of price is justified, for example, when selling certain food products (fresh fish, flowers, etc.). The use of such a price is effective when there are a small number of levels of management hierarchy in an enterprise, when the rights to make decisions on prices are delegated to the lowest level of management.

The preferential price strategy provides for a certain reduction in the price of goods by an enterprise that occupies a dominant position (market share 70-80%) and can provide a significant reduction in production costs by increasing production volumes and saving on costs of selling goods. The main task of the enterprise is to prevent new competitors from entering the market, to force them to pay too high a price for the right to enter the market, which not every competitor can afford.

The strategy for setting prices for discontinued products, the production of which has been discontinued, does not involve selling at reduced prices, but targeting a strictly defined circle of consumers who need these particular goods. In this case, prices are higher than for regular goods. For example, in the production of spare parts for cars and trucks of a wide variety of makes and models (including discontinued ones).

There are certain features of setting prices serving foreign trade turnover. Foreign trade prices are determined, as a rule, on the basis of prices on the main world commodity markets. For exported goods within the country, special prices are set for export. For example, until recently, for mechanical engineering products exported, premiums were applied to wholesale prices for export and tropical versions. For some types of products in short supply when exported, it is added to prices customs duty. In many cases, free retail prices are set for imported consumer goods based on the relationship between supply and demand.

Selecting a pricing method.

Having an idea of ​​the patterns of formation of demand for a product, the general situation in the industry, prices and costs of competitors, and having determined its own pricing strategy, the enterprise can move on to choosing a specific pricing method for the product produced.

Obviously, a correctly set price must fully compensate for all costs of production, distribution and marketing of goods, and also ensure a certain rate of profit. There are three possible pricing methods: setting a minimum price level determined by costs; establishing a maximum price level generated by demand, and, finally, establishing an optimal price level. Let's consider the most commonly used pricing methods: “average costs plus profit”; ensuring break-even and target profit; setting prices based on the perceived value of the product; setting prices at current prices; "sealed envelope" method; pricing based on closed bidding. Each of these methods has its own characteristics, advantages and limitations that must be kept in mind when developing prices.

The simplest method is considered to be “average costs plus profit,” which involves adding a markup to the cost of goods. The amount of the markup can be standard for each type of product or differentiated depending on the type of product, unit cost, sales volume, etc.

The manufacturing company itself must decide which formula it will use. The disadvantage of the method is that the use of a standard markup does not allow taking into account the characteristics of consumer demand and competition in each specific case, and, consequently, determining the optimal price.

Yet the markup-based calculation method remains popular for a number of reasons. First, sellers know more about costs than about demand. By tying price to costs, the seller simplifies the pricing problem for himself. He does not have to frequently adjust prices based on fluctuations in demand. Secondly, it is recognized that this is the fairest method in relation to both buyers and sellers. Thirdly, the method reduces price competition, since all firms in the industry calculate prices using the same average cost plus profit principle, so their prices are very close to each other.

Another cost-based pricing method aims to achieve a target profit (break-even method). This method makes it possible to compare the amount of profit received at different prices, and allows a company that has already determined its profit rate to sell its product at a price that, with a certain production program, would allow it to achieve this task to the maximum extent.

In this case, the price is immediately set by the company based on the desired amount of profit. However, to recover production costs, it is necessary to sell a certain volume of products at a given price or at a higher price, but not a smaller quantity. Here, price elasticity of demand becomes especially important.

This pricing method requires the firm to consider different pricing options, their impact on the volume of sales needed to break even and achieve target profits, and analyze the likelihood of achieving all of this at each possible price of the product.

Pricing based on the “perceived value” of a product is one of the most original pricing methods, with an increasing number of firms starting to base their price calculations on the perceived value of their products. In this method, cost targets fade into the background, giving way to customers’ perception of the product. To form an idea of ​​the value of a product in the minds of consumers, sellers use non-price influence methods; provide after-sales service, special guarantees to buyers, the right to use the trademark in case of resale, etc. The price in this case reinforces the perceived value of the product.

Setting prices at current prices. By setting a price taking into account the current price level, the company is mainly based on the prices of competitors and pays less attention to indicators of its own costs or demand. It can set a price above or below the price of its main competitors. This method is used as a price policy tool primarily in those markets where homogeneous goods are sold. A firm selling homogeneous products in a highly competitive market has a very limited opportunities influence on prices. Under these conditions, on the market of homogeneous goods, such as food products, raw materials, the company does not even have to make decisions on prices; its main task is to control its own production costs.

However, firms operating in an oligopolistic market try to sell their goods at a single price, since each of them is well aware of the prices of its competitors. Smaller firms follow the leader, changing prices when the market leader changes them, rather than depending on fluctuations in demand for their goods or their own costs.

The current price level pricing method is quite popular. In cases where the elasticity of demand is difficult to measure, firms believe that the current price level represents the collective wisdom of the industry, the key to obtaining a fair rate of return. And besides, they feel that sticking to the current price level means maintaining a normal equilibrium within the industry.

Pricing based on the sealed envelope method is used, in particular, in cases where several firms compete with each other for a contract for machinery and equipment. This most often happens when firms participate in tenders announced by the government. A tender is a price offered by a company, the determination of which is based primarily on the prices that competitors can set, and not on the level of its own costs or the amount of demand for the product. The goal is to win the contract, so the firm tries to set its price below that of its competitors. In cases where the firm is unable to foresee the price actions of competitors, it proceeds from information about their production costs. However, as a result of the information received about possible actions competitors, the company sometimes offers a price below the cost of its products in order to ensure full production capacity.

Pricing based on sealed bidding is used when firms compete for contracts during bidding. At its core, this pricing method is almost no different from the method discussed above. However, the price established on the basis of closed bidding cannot be lower than cost. The goal here is to win the auction. The higher the price, the lower the likelihood of receiving an order.

Having chosen the most suitable option from the methods listed above, the company can begin to calculate the final price. In this case, it is necessary to take into account the buyer’s psychological perception of the price of the company’s product. Practice shows that for many consumers the only information about the quality of a product is contained in the price and, in fact, the price acts as an indicator of quality. There are many cases where, with rising prices, the volume of sales, and, consequently, production increases.

Price modifications.

An enterprise usually develops not just one price, but a system of price modifications depending on various market conditions. This pricing system takes into account the peculiarities of the quality characteristics of the product, product modifications and differences in the assortment, as well as external factors sales, such as geographical differences in costs and demand, intensity of demand in certain market segments, seasonality, etc. Various types of price modification are used: a system of discounts and surcharges, price discrimination, stepwise price reductions for the offered range of products, etc.

Price modification through a system of discounts is used to stimulate buyer actions, for example, purchasing larger quantities, concluding contracts during a period of sales decline, etc. In this case, different discount systems are used: discount, wholesale, functional, seasonal, etc.

Discounts are discounts or reductions in the price of goods that encourage payment for goods in cash, in the form of an advance or prepayment, or before the due date.

Functional or trade discounts are provided to those companies or agents that are part of the sales network of the manufacturing enterprise, provide storage, accounting for commodity flows and sales of products. Typically, equal discounts are used for all agents and companies with which the company cooperates on an ongoing basis.

Seasonal discounts are used to stimulate sales during the off-season, i.e. when the underlying demand for a product falls. In order to maintain production at a stable level, the manufacturing enterprise may provide post-season or pre-season discounts.

Modification of prices to stimulate sales depends on the goals of the company, the characteristics of the product and other factors. For example, special prices may be set during any events, for example, seasonal sales, where prices for all seasonal goods are reduced, exhibitions or presentations, when prices may be higher than usual, etc. To stimulate sales, bonuses or compensation may be used to the consumer who purchased the product in retail trade and sent the corresponding coupon to the manufacturing enterprise; special interest rates when selling goods on credit; warranty terms and maintenance agreements, etc.

Geographical price modification is related to the transportation of products, regional features supply and demand, income levels and other factors. Accordingly, uniform or zonal prices may be applied; taking into account the costs of delivery and cargo insurance, based on the practice of foreign economic activity, the FOB price, or franking system (ex-supplier warehouse, ex-wagon, ex-border, etc.), is used.

It is customary to talk about price discrimination when a company offers the same products or services at two or more different prices. Price discrimination manifests itself in various forms depending on the consumer segment, the form of the product and its application, the image of the enterprise, the time of sale, etc.

A stepwise reduction in prices for the offered range of goods is used in the case when an enterprise produces not individual products, but entire series or lines. The enterprise determines which price levels need to be introduced for each individual product modification. In addition to differences in costs, it is necessary to take into account the prices of competitors' products, as well as purchasing power and price elasticity of demand.

Price modification is possible only within the upper and lower limits of the established price.

Pricing policy is one of the most important areas of activity of an enterprise, indicating its effectiveness.

You will learn:

• What types of pricing policies are there depending on the type of market.
• How to choose a pricing strategy.
• How the company's pricing policy is formed.
• How to analyze pricing policy.
• What mistakes lead to ineffective management of a company's pricing policy.

What is the essence and goals of pricing policy

If free pricing is not possible, there are two options. The first is a strict limitation on the scope of natural prices. The second is allowing their free movement, but with regulation at the state level. When defining the objectives of a pricing policy, an enterprise must clearly understand what exactly it wants to achieve with a particular product.

The main goals and objectives of pricing policy throughout the entire market are to stop the decline production process, limiting the rate of inflation, stimulating entrepreneurs, increasing profits through the production of goods, not their prices. If a company knows exactly in which market it will promote its product and how best to position itself in a competitive and consumer environment, then it is much easier for it to form a set of marketing activities, including thinking through pricing, because the development of a pricing policy mainly depends on how the company plans to position itself in the market.

At the same time, the company may pursue other goals. If she clearly represents them, then, of course, she knows better what pricing policy suits her. Example: a company may strive to survive among competitors without losing its current position, increase revenue, become a market leader in its industry, or produce the highest quality product.

If a company has intense competition, then the main goal should be survival. To ensure normal operation and sales of their products, enterprises have no choice but to sell goods at low prices in order to achieve customer loyalty. Here the primary task for them becomes survival, not increasing income. As long as the reduced prices cover costs, companies in financial difficulties can somehow stay afloat.

The main goal for many companies is to maximize current income. Enterprises in this category study demand and production costs in relation to different price levels and settle on such an acceptable cost that will help maximize current income and most fully cover costs. If this is the case, it means the company is committed primarily to improvement. financial indicators and they are more important to her than achieving long-term goals.

Enterprises of another category strive for leadership in the industry, guided by the fact that companies that occupy first positions operate with the lowest costs and the highest financial performance. Striving for leadership, companies reduce prices as much as possible. One option for this goal may be the desire to achieve a specific increase in market share, which is the essence of the pricing policy of such enterprises.

Some companies want the quality of their products to be the highest among their competitors. Typically, luxury products are priced quite high to cover production costs and expensive research.

Thus, pricing policy is used by firms for different purposes, for example to:

• increase sales profitability, that is, the percentage of profit to total sales income;
• increase the return on the company's net equity (the ratio of profit to total assets on the balance sheet minus all liabilities);
• maximize the profitability of all company assets (the ratio of profit to the total amount of accounting assets, the basis for the formation of which is both own and borrowed funds);
• stabilize prices and income levels, strengthen market positions, that is, the company’s share of total sales in a given product market (this goal may be especially significant for companies operating in a market environment where the slightest price fluctuation causes significant changes in sales);
• achieve the highest rates of sales growth.

Expert opinion

Price is not the main indicator that determines the buyer’s choice

Igor Lipsits,

Professor, Department of Marketing, State University Higher School of Economics, Moscow

Many companies believe that it is the low price that, more than other indicators, influences the consumer’s decision to purchase a product. Such enterprises believe that by lowering the price they can increase sales. But that's not true. In fact, if the seller acts according to this scheme, the buyer thinks that the only advantage of the product is its low cost, and therefore does not pay attention to other important characteristics - quality, uniqueness, service.

The best option here is to increase the cost relative to competitors’ products, but at the same time draw the buyer’s attention to uniqueness, service, quality and other indicators that are important to him.

How to beat your competitor in a price war: 3 strategies

In an effort to maintain consumer flow, we often get involved in price wars. However, the blind, thoughtless implementation of such a strategy often leads to a significant loss of profit. The editors of the Commercial Director magazine have identified three strategies for winning price wars.

Types of pricing policies depending on the type of market

The organization's pricing policy is largely determined by the type of market chosen to promote its products. Below we will look at four of its types. It should be noted that each of them has individual pricing problems:

1. Market of pure competition.

In a purely competitive market, numerous sellers and buyers of similar products interact. Individual producers and consumers have almost no influence on current market prices. The seller does not have the right to set higher prices compared to market prices, since buyers can freely buy goods in any quantity they need at the existing price. market value.

In a purely competitive market, sellers do not devote much time to the long-term formation of a marketing strategy. As long as the market remains a purely competitive market, the role of marketing research, product development activities, pricing policies, sales promotion and other processes is limited.

2. Market of monopolistic competition.

This type of market has its own specifics. A large number of sellers and consumers interact on it, making transactions not at a single market value, but at a wide range of prices. Their range here is quite wide. This is because sellers can offer consumers products in a variety of options. Specific products have different characteristics, design, and quality. Services associated with products may also differ. The consumer understands the features of different offers and is willing to pay different amounts for them.

To stand out with something other than price, companies develop many offers for individual customer groups, actively assign brand names to products, conduct advertising campaigns, and use personal selling methods.

3. Market of oligopolistic competition.

In an oligopolistic market there are few sellers. Pricing policy and marketing strategies each other cause a rather sharp reaction in them. Sellers cannot significantly influence the price level, and for new applicants penetration this market- the process is quite complicated. Therefore, competition here for the most part is not related to prices. Sellers strive to attract buyers in other ways: by improving product quality, conducting advertising campaigns, providing guarantees and good service.

Every seller operating in an oligopolistic market knows that if he lowers his price, others will certainly react to this. As a result, the demand that has increased due to the reduced cost will be distributed among all companies. The company that lowers its price first will receive only a certain percentage of the increased demand. If this company raises its price, others may not follow suit. Accordingly, the demand for its goods will decrease much faster than would happen with a general increase in prices.

4. Pure monopoly market.

In a pure monopoly market, producers control prices very carefully. The seller here is either a public or private regulated or unregulated monopoly.

A monopoly at the state level can pursue a certain pricing policy to achieve different goals. For example, setting the price for products that are important to the buyer below cost makes them more accessible. If the goal is to reduce consumption, the price can be set very high. The goal may also be to cover all costs and make a good profit.

If the monopoly is regulated, the state allows the enterprise to set the price, subject to certain restrictions. If the monopoly is unregulated, the company has the right to sell the product at any price, the maximum allowable under existing market conditions.

But monopolists do not set the highest possible prices in all cases. The law of demand states that when price increases, demand decreases, and when price decreases, demand increases. “Pure” monopolists remember: in order to sell an additional quantity of a product, it is necessary to reduce its cost. That is, a monopolist cannot set an absolute price for its product. He does not want to attract the attention of competitors, trying to conquer the market as quickly as possible, and is wary of introducing government regulation.

Pricing strategies and features of their choice

1. Pricing strategy, which is based on the value of the product (the “cream skimming” strategy).

Companies using this strategy set high prices for products in a small market segment and skim the cream as they achieve high profitability on sales. The cost is not reduced to ensure that new consumers who enter this market segment reach a higher level. This strategy can be used if the product’s characteristics are truly superior to analogues or are unique.

2. Strategy for following demand.

This strategy has a lot in common with skimming. But in this case, enterprises do not maintain high prices all the time and do not convince consumers to reach a qualitatively new, more respectable level. Companies are gradually reducing the price, carefully controlling this process.

Sometimes firms make minor adjustments to a product's design, features, and capabilities to make it different from its predecessors. Often, companies, in order to accommodate lower product costs, promote product sales, change packaging, or prefer a different distribution method. At each new lower level, the price is maintained long enough to satisfy current demand in full. As soon as sales begin to decline, the company immediately thinks about the next price reduction.

3. Penetration strategy.

Pricing policy methods are very diverse. There is also a so-called price breakthrough - this is the establishment of a very low cost. Companies resort to this method to quickly get used to a new market and secure cost advantages from production volumes. If the company is small, such a strategy is unlikely to suit it, since it does not have the necessary production volumes, and the reaction from competitors in the retail trade can be very harsh and rapid.

4. Strategy to eliminate competition.

This strategy is similar to the previous one, but has different goals. Its main task is to block competitors from entering the market. The strategy is also used to increase sales to the highest possible level before a rival enters the market. In this regard, the price is set as close to the costs as possible. This brings in little income and is only justified in the case of large sales.

For a small company, this strategy helps to concentrate on a small market segment. Thanks to it, there are opportunities for quickly entering the market, making a profit in the shortest possible time and just as quickly leaving this segment.

5. Other strategies.

There are other pricing strategies, namely:

• maintaining a stable position in the market environment (when the company maintains a moderate percentage of return on equity. In the West, this figure is 8-10% for large-scale organizations);
• maintaining and ensuring liquidity - the solvency of the company (within the framework of this strategy, the enterprise must mainly choose reliable partners through whom it could consistently make a profit; here it is reasonable for the company to switch to payment methods that are convenient for customers, begin to provide benefits to the most valuable partners, etc. );
• expanding the company’s export capabilities (this strategy is associated with “skimming the cream” in new markets).

Pricing policy must be conducted in accordance with legal regulations and not contradict them. But there are other strategies that companies should avoid using. Some of them are prohibited at the state level, others contradict those accepted in the market ethical standards. If an enterprise uses a prohibited strategy, it risks facing retaliatory actions from competitors or imposition of sanctions by government agencies.

Here are the prohibited pricing policy strategies:

• monopolistic price formation - a strategy associated with setting and maintaining monopolistically high prices. Companies resort to it to obtain excess profits or monopoly profits. There is a government ban on the use of this strategy;
• price dumping - in accordance with it, an enterprise deliberately lowers its prices relative to market prices in order to beat competitors. This strategy is associated with monopolism;
• pricing strategies based on agreements between economic entities that limit competition, including agreements aimed at:
• setting prices, discounts, surcharges, markups;
• increasing, decreasing or maintaining prices at auctions and trades;
• division of the market on a territorial or other basis, restriction of access to the market, refusal to enter into agreements with specific sellers or buyers;
• price formation strategies due to which the pricing procedure established by regulatory legal acts is violated;
• pricing and pricing policy for speculative purposes.

Any pricing strategy is a condition that determines how the product will be positioned in the market. At the same time, pricing policy in marketing is a function whose formation is influenced by certain factors. Among them:

1. Stages of the product life cycle.

This factor significantly influences both pricing and marketing strategy.

At the implementation stage, there are 4 types of pricing strategies.

During the growth stage, the level of competition usually increases. In this case, companies are trying to establish long-term cooperation with independent sales agents and are organizing their own sales channels. Their prices, as a rule, do not change. Companies strive to maintain rapid sales growth and, in pursuit of this goal, resort to improving and modernizing products, introducing improved products into untapped market segments, and intensifying advertising campaigns to encourage customers to buy them again.

At the maturity stage, the company reaches a stable level of sales and has regular customers.

At the saturation stage, sales volume finally stabilizes and repeated purchases support it. Here, businesses spend more time searching for untapped market segments, developing activities to win the loyalty of new audiences, and also thinking about whether and how regular customers can use the product in new ways.

To prevent a possible decline in sales, enterprises should take timely measures to prevent it - modify the product, work on quality, and improve characteristics. Sometimes it makes sense to reduce the price to make a product accessible to a wider consumer audience.

2. Newness of the product.

The price formation strategy is also influenced by what product the price is set for - a new one or one already existing on the market.

When deciding on a pricing strategy for a new product, an entrepreneur can act in three ways, namely:

Initially, set the highest possible price for the product, focusing on wealthy buyers or those who first look at the quality and properties of the product and only then at the price. After initial demand weakens and sales volumes decrease, the entrepreneur lowers the price, making the product available to a wider consumer audience. That is, in this case, the manufacturer is gradually covering profitable market segments. This pricing policy is called skim pricing.

Companies operating in accordance with it pursue short-term goals. It is reasonable to use this strategy if:

• demand for products is quite high;
• there is inelastic demand for the product;
• a company can effectively protect itself from competitors by obtaining a patent or continuously improving the quality of a product;
• high cost in the eyes of buyers means good quality products.

First, the company sets a low price for the product in order to fill a certain niche in the market, avoid competition, increase sales and take a leadership position. If the likelihood of competition persists, the company can, by reducing costs, further reduce the cost of the product. Another option is the desire to become a leader in quality. In this case, the company can increase the costs of scientific and technical development and increase prices.

If there is no threat of competition, the company needs to increase or decrease the cost in accordance with demand. However, it should be borne in mind that a price increase is justified only when the company is one hundred percent confident in the recognition and demand of its product among the consumer environment.

The company operates in accordance with the strategy of “penetration pricing”, striving to achieve long-term goals. This pricing policy is suitable for a company if:

• the demand for its products is quite high;
• there is elastic demand for the product;
• low prices do not attract competitors;
• low prices in the eyes of consumers are not synonymous with low-quality products.

3. Combination of price and quality of goods.

Pricing policy is a function that determines the positioning of products in the market environment by choosing the optimal combination of price and quality.

• Product quality control, which cannot be neglected

Table 1. Types of strategies based on price and quality

Strategies show how quality affects price changes. In the same market, it is permissible to simultaneously use strategies 1, 5 and 9. For them to be successfully implemented, the corresponding categories of buyers must be present in the market.

Strategies 2, 4, 6, 8 are transitional options.

The purpose of strategies 2, 3 and 6 is to displace competitors from positions 1, 5 and 9; These are strategies for creating value advantages.

Strategies 4, 7 and 8 demonstrate how prices increase in relation to the consumer characteristics of the product. If competition in the market is high, the company's reputation depends on this method may get hurt.

4. Market structure and the company’s place in the market environment.

The determining factors of pricing policy here are leadership, market development, exit from it, etc. Generally speaking, monopolism in a market environment is not synonymous with uncontrolled price increases, since there is always the risk of competitors appearing with less costly production technology or analogue products . If such a situation arises, new competitors have the opportunity to firmly establish themselves in the market, occupy a significant part of it and get ahead of the segment leader who is improving its lagging technologies. That is, to be a pricing leader, market prices must be kept fairly high so that fund returns continue to attract new investment, but also kept low enough to avoid competition.

Markets intermediate between an oligopoly and a multi-supplier market can be controlled in part by mutual agreement.

5. Competitiveness of the product.

This pricing policy involves the company comparing its product with competitors' products and setting the price based on demand. We should not forget about the influence of other factors, including the reputation of the company, the types and methods of distribution of products used, which contribute to the formation of the competitiveness of the company and its products.

This strategy can be considered safe only if the company is the undisputed leader in its products. The company must also know what guides consumers from different segments in the domestic and foreign markets when making purchases. At the same time, it may be difficult to determine competitors’ prices due to their discounts and additional services, for example, free delivery and installation.

The strategies described above are not all the options that a company can use when setting prices. Each company has the right to develop its own pricing policy, based on many individual criteria.

Expert opinion

The only rational principle of pricing is profit orientation

Herman Simon,

CEO of Simon-Kucher & Partners Strategy & Marketing Consultants, pricing expert, Bonn

My experience is that the price that generates maximum revenue is significantly lower than the price that generates maximum profit.

If you have a linear demand curve and a linear cost function, the price that maximizes revenue will be half the maximum price. The price that maximizes profit is midway between the maximum price and the variable cost per unit.

Let me give you an example. The company sells machine tools at a maximum price per unit of goods of $150. The variable cost per unit is $60. Wherein:

• the price that maximizes revenue is $75 (150:2). Losses on the sale of goods at this cost amounted to $7.5 million;
• the price that maximizes profit is $105 (60 + (150 – 60) : 2). Profit amounted to $10.5 million.

To maximize profits, change the motivation system. Tie the seller's commission to the size of the discount: the smaller it is, the greater his bonus. Our company has organized such systems for enterprises operating in different industries. Discounts are reduced by several percent, but sales remain at the same level. Buyers stay with us. For a company to achieve better results, the sales rep's tablet or computer should be able to see changes in their commission amounts during value negotiations.

Expert opinion

4 Simple and Effective Ways to Manage Price

Yuri Steblovsky,

Customer Service Specialist, Runa Company

1. Cautious price increases. The main ones of this type are gradual changes and working so that buyers do not immediately notice them. It is necessary to increase the price not for all products in the assortment, but only for those products that customers do not use every day.
2. Price testing. On different days, they set different prices for the product, and then analyze which one customers responded to more.
3. Working with special offers. If a store mainly sells products with small margins; buyers should be offered the most highly profitable products as a companion product.
4. Customization. Involves individualization of sales. For example, if a store sells mugs, then it can offer the buyer to purchase a product with a print of their choice that costs twice as much as an analogue with the manufacturer’s design. Constantly conduct experiments and evaluate their results. Customization is an essential component in business development.

• How to sell a product at a higher price and earn more: 8 simple ways

Pricing policy factors influencing pricing

The company's choice of pricing policy is determined by a number of factors. Let's look at each of them.

• Value factor.

This is one of the most important indicators when choosing a pricing policy. Any product is more or less capable of satisfying customer requirements. To reconcile the cost and utility of a product, a company can give it more value - through promotional activities, show the buyer how good it is and set a price that is consistent with its real value.

• Cost factor.

The minimum cost of production consists of costs and profit. The easiest method of pricing is to add an acceptable rate of profit for known costs and expenses. But even if the price covers the costs, there is no guarantee that the product will be bought. In this regard, some manufacturing companies go bankrupt when the price of their products on the market becomes less than the production costs and expenses associated with its sale.

• Competition factor.

Pricing policy is very dependent on competition. A company can increase competition by choosing a high price, or eliminate it by setting a minimum price. If the creation of a product involves a complex production process or a special release method, then low cost will not attract competitors. But with high prices, rival companies will understand what to do.

• Sales promotion factor.

The price of products includes a trade margin, designed to recoup all measures aimed at stimulating sales. When a product enters the market, advertising must cross a threshold of perception before consumers become aware of the new product.

In the future, funds from the sale of goods should cover the costs aimed at stimulating sales.

• Distribution factor.

The cost of production largely depends on its distribution. The closer the product is to the buyer, the more expensive it is for the company to distribute it. If the product is delivered directly to the buyer, then each concluded transaction will turn into a separate operation. The manufacturer will receive the funds due to the supplier, but at the same time his production costs will increase.

This distribution method is good because it allows you to completely control sales and marketing. If a product is purchased by a large retail consumer or wholesaler, sales are no longer calculated in units, but in tens. In this case, control over the sale of goods and marketing is lost.

Distribution is the most important factor in marketing after the product itself. A product is not always able to fully satisfy the requirements of all consumers. Understanding this, manufacturers, depending on the price level, are more or less willing to make concessions in quality, weight, color, characteristics, etc. But, even if the seller, offering the lowest prices in his market segment, does not have the goods in stock right moment in the right place, no promotional activities will help him.

Finding professional distributors who would be willing to sell goods is a rather expensive process. Intermediaries want to receive decent remuneration for storing products in warehouses and distributing them. The amount for these purposes must be included in the cost of goods. At the same time, the company must ensure that costs do not exceed similar costs of competitors.

• Public opinion factor.

The company's pricing policy largely depends on this driving force. As a rule, buyers have an established opinion about the cost of products. It doesn’t matter whether it is consumer or industrial.

When purchasing a product, people take into account certain price limits within which they are willing to buy it. The company must either not go beyond them, or let the buyer understand why the cost of the product does not fit within these limits.

The manufactured products may be better than their analogues in terms of their characteristics. If the audience perceives these advantages positively, then the price can be increased. If a product does not have obvious advantages, the company should conduct additional advertising campaigns or otherwise stimulate sales.

• Service factor.

There are pre-sales, sales and after-sales services. The costs of this must be included in the cost of the products offered. Such expenses, as a rule, include activities related to the preparation of quotes, carrying out calculations, installing equipment, delivering products to the point of sale, training and retraining of service personnel (salespeople, cashiers, customer interaction consultants), providing a guarantee or the right to purchase installment terms.

Many types of products do not require after-sales service. However, at the same time, a significant part of consumer goods (groceries, everyday goods) requires pre-sale service, for example, their placement in a display case, demonstration of characteristics. The costs of all these services must be included in the price of the goods.

• Customer service rules that increase sales in 3 stages

Development and formation of pricing policy: 7 stages

1. First, the enterprise determines what goal it should pursue. For example, this could be reaching a new level of sales or developing the business as a whole.
2. At the next stage, internal marketing research is carried out. The production capacity of the equipment, the cost of paying wages to personnel, the cost of raw materials and supplies, the cost of delivering products to points of sale and the search for new distribution channels, investments in marketing activities to promote sales, etc. are assessed.
3. Next, the company looks at what the pricing policy is, how flexible it is, how it is formed, what price range is set for similar products, and how changing market factors influence customer preferences.
4. At the fourth stage, the enterprise decides how it will set the retail price for goods. Main criterion when determining the approach to pricing - the highest possible profit from sales.
5. The fifth stage is the development of programs for adapting value to a changing market environment. The company analyzes what determines the level of demand among buyers and why the price has to be adjusted. This need may be determined by:

• increased costs for the production process and employee salaries;
• the need to increase production capacity and attract additional labor;
• the general state of the economy, prerequisites for the emergence of a crisis;
• quality of goods;
• a set of functional properties of the product;
• availability of similar products on the market;
• the prestige of the brand under which the products are sold;
• income of possible buyers;
• stages of the product life cycle;
• dynamics of demand development;
• type of market.

These parameters can be combined with each other and supplemented with other conditions. The main difficulty at this stage is that most of the indicators cannot be measured quantitatively.

6. The sixth stage is the final one, where the cost of the goods turns into monetary equivalent. The result of the pricing policy is always the price, the correctness of which is judged by the buyer. It is he who decides how optimally the consumer value of the product and its monetary expression are combined.

Before using one or another pricing policy, one cannot help but take into account the general retail price level in everyday dynamics. Such data can be provided by statistical directories, catalogs of various companies and other sources.

How to analyze pricing policy

Analysis of pricing policy involves studying the price level. Experts discuss whether the current price of a product can ensure profitability, how attractive it is in comparison with competitors’ prices, how elastic demand is in terms of price, what kind of pricing policy the government is pursuing, and also look at other parameters.

When a company sets unfavorable prices, it finds out what is causing it. The formation of unprofitable costs may be associated with the need to maintain sales at the same level while the quality of the product decreases, market capture policies, government pricing policies and other reasons. When a company evaluates how attractive the price of its products is to customers, it compares its prices with the average prices of its competitors for similar products in the industry.

If demand is elastic and the company sets itself the goal of capturing the market, then it can reduce the price. If it wants to maintain its market share, it can increase its value. If you plan to maximize profits, you should set the optimal price.

The basis for constructing a cost function can be the direct calculation method (selective), algebraic or mixed method. The basis for calculating the optimal cost and sales level is the condition of profit maximization, which is achieved if marginal costs and marginal revenue are equal.

The maximum profit is calculated as the derivative of the income function:

(C x D)’ = (a0 x D2 + a1 x D)’ = 2 a0 x D + a1

Marginal cost in economic terms is the cost of producing an additional unit of a good. Other things being equal, they are equal to variable costs per unit of output. The mathematical derivative of the cost function also equals the variable cost per unit:

C ‘ = (VCed x D + FC) ‘ = VCed

Let us imagine the equality of marginal revenue and marginal costs:

2 a0 x D + a1 = VCed

In this case, to calculate the optimal sales volume (Dopt), the following formula is used:

Dopt = (VCed – a1) / 2 a0

To calculate the optimal price (Tsopt) use the following formula:

Copt = a0 x Dopt + a1

Thanks to the results of the analysis of pricing policy, the company can determine how effective the current strategy is and, if necessary, make changes to it. Adjustments to pricing policies should be made based on the life cycle or type of product. For example, if an enterprise has recently begun to produce a product, its pricing policy should be aimed at capturing the market environment. If the product is at maturity, the price should be set to generate short-term profit. If a product is in a period of decline, the cost is formed so that the previous level of sales can be maintained.

The basis of a market economy is made up of financially independent commodity producers, for whom price is a decisive indicator of production and economic activity. If a company has chosen the right pricing strategy, correctly forms prices and uses economically proven pricing methods, then it will certainly achieve success and good financial performance in its work. Its form of ownership does not matter.

Mistakes that make pricing policy management ineffective

Pricing policy is one of the fundamental factors influencing the successful operation of a company. In this regard, prices should be set very carefully.

Often, marketers and business managers make a number of mistakes that lead to unsatisfactory economic performance. You need to constantly be in close cooperation with the production department in order to know about all the cost items that appear during the manufacture of goods without exception. If a company misses even the slightest detail, it risks reducing the efficiency of its work in the future.

Before launching products on sale, it is necessary to conduct detailed marketing research. Based on its results, you can judge how valuable the product is to the buyer. If the company decides that it is not necessary to carry out this event, then it may well set an unreasonably low cost and miss out on possible profits that would allow it to expand production.

You should also pay attention to the actions of competitors, in particular what pricing policy they follow. It is necessary to study several possible scenarios that determine how competitors will react to your events. If you underestimate your rivals, you may well lose your position in the market to them due to ineffective pricing policies.

Pricing policy of an enterprise using the example of well-known companies

• Coca-Cola.

The Coca-Cola Company's pricing policy is focused on seasonal demand. Since people consume soft drinks in greater quantities during the summer, the company negotiates the price from resellers. That is, if intermediaries set a markup that does not exceed 15%, the goods are sold on preferential terms. As a result, the final price for Coca-Cola products is formed. Such pricing and pricing policy have allowed The Coca-Cola Company to occupy a leadership position among domestic and foreign manufacturers for a very long time.

• Danone.

Today Danone is the undisputed leader in the dairy products market. This position allows it to set the highest possible prices, while offering the buyer a product of excellent quality. Such a pricing policy brings super-profits to the company - it “skims the cream” from the segment of buyers who have a special commitment to the brand. When a given category becomes saturated with products, Danone begins to gradually reduce prices in order to achieve loyalty among consumers of other groups.

• Aeroflot.

The company's pricing policy is that Aeroflot offers a variety of tariffs, presented in three directions: simplified tariff schedule, online sales rates and new offer packages. Prices for air tickets in all three categories allow the company to earn a good income and take a leading position in the market in its industry.

Aeroflot's pricing policy is structured in such a way that each passenger can choose the optimal price conditions for themselves. The company takes into account the dynamics of pricing offers from competing companies and uses the obtained data in its work. It should also be noted that Aeroflot air transportation is available to many categories of buyers, since the company provides preferential rates and various kinds of discounts.

• Apple.

The company managed to build such a pricing policy that the price for one unit of goods cannot be lower than $1,000, and with the release of each new product model, brand followers immediately want to purchase it. Expert estimates suggest that the enterprise value will very soon be equal to one trillion dollars, which will make Apple the most valuable brand in history.

Even at the very start, Apple's pricing policy was strict. The company was guided by the fact that the majority of the consumer audience perceives “expensive” as “quality” and does not attach much importance to overpayment.

Apple does not use a discount system. The only exception is when students can purchase brand products a little cheaper, but even here the buyer's savings do not exceed $100.

Both sales offices and resellers adhere to this pricing policy. The only way to buy new Apple products at a discount is on the Internet, for example, on eBay.

• Samsung.

Samsung's pricing policy is based on two main principles. Firstly, the enterprise focuses on a brand that occupies a leadership position. Secondly, it uses techniques psychological impact per consumer. The price of one unit of goods is never expressed as a whole number, for example, 4990 rubles.

Samsung products are designed for consumers with average incomes and above. Despite the low cost, the brand's products are of very high quality. A small component of the price is for warranty service. Its presence increases the loyalty of consumers aimed at purchasing equipment and comparing offers from different manufacturers.

Information about the experts

Igor Lipsits, Professor of the Department of Marketing, State University - Higher School of Economics, Moscow. Igor Lipsits - Doctor of Economics, Professor. Author of 20 monographs and textbooks. Consults foreign and Russian companies (including RAO UES of Russia, AFK Sistema) on marketing and business planning.

Herman Simon, CEO of Simon-Kucher & Partners Strategy & Marketing Consultants, pricing expert, Bonn. Herman Simon is director of Simon-Kucher & Partners Strategy & Marketing Consultants (New York). The company has 33 offices in 23 countries. Pricing expert. He is one of the five recognized experts in the field of management along with Peter Drucker, Fredmund Malik, Michael Porter and Philip Kotler. In the fall of 2016, his book “Confessions of a Pricing Master” was published in Russia. How price affects profit, revenue, market share, sales volume and company survival” (M.: Byblos, 2017. - 199 pp.).

Pricing and pricing policy

Pricing is the process of setting prices for goods and services. There are two main pricing systems: market and centralized state. Market pricing operates on the basis of the interaction of supply and demand; government pricing is the formation of prices by government agencies. In market conditions, pricing is a complex process influenced by many factors. In each case, the marketing service will have to choose the pricing policy of the enterprise.

The pricing policy of an enterprise is to set appropriate prices for goods and services and thus adjust them depending on the market situation by interrelating the prices of goods within the range, using special discounts and price changes, the ratio of the enterprise’s prices and the prices of competitors, methods of formation prices for new goods in order to capture its maximum possible share, achieve the planned amount of profit and successfully solve all strategic and tactical tasks.

When developing pricing policies, marketers should get answers to the following questions: what is the market model; what place does the price take among competitors in the market segments where the enterprise operates; what price calculation method should be adopted; what should be the pricing policy for new products; how the price should change depending on the life cycle of the product; what are the costs? Pricing policy has a long-term impact on the activities of the enterprise. Therefore, before developing it, it is necessary to analyze all external (independent of the enterprise) and internal (depending on the enterprise) factors influencing the development of a pricing strategy.

The main environmental factors influencing the price level are: public policy; political stability in the country, as well as in the countries where the company’s products are sold; resource provision; state regulation of the economy; perfection of tax legislation; general inflation rate; nature of demand; presence and level of competition, etc.

The main factors of the internal environment of an enterprise that influence pricing include: product properties; quality and value of products for the buyer; the specifics of the products produced (the higher the degree of processing and the more unique the quality, the higher the price); production method, procurement of raw materials and materials (small-scale and individual production products have a higher cost, goods mass production have relatively low costs and not so high a price); mobility of the production process; targeting market segments; life cycle goods; duration of the product distribution cycle from producer to consumer; differences between market segments or customer demand factors; competitors' reactions; service organization; image of the enterprise in the domestic and foreign markets; product promotion activities, marketing goals.

The pricing strategy is linked to the overall goals of the enterprise in the market. Such goals may be: increasing sales of goods; obtaining a given or maximum amount of profit; ensuring survival (winning a larger market share); gaining market leadership; maintaining the existing economic situation in the fight against competitors; formation of a certain image of a product, etc. An enterprise chooses each of its goals based on certain reasons or its financial situation.

The pricing policy of an enterprise can be formed on the basis of costs, demand and competition. When forming a cost-based pricing policy, prices are determined based on production costs, service costs, overhead costs and estimated profits. When forming a pricing policy based on demand, the price is determined after studying customer demand and setting prices acceptable for the target market. When forming a pricing policy based on competition, prices can be at market levels, below or above them. All three approaches require a comprehensive solution to a number of problems determined by the choice of one or another pricing policy.

When forming a pricing policy, a marketer should answer the following basic questions: what price would the buyer be willing to pay for the company’s product; How does a change in price affect sales volume? what are the constituent cost components; what is the nature of competition in the segment; what is the level of the minimum price that ensures the break-even of the enterprise; will delivery of goods to the buyer affect the increase in sales volume; what discount can be provided to customers, etc.

Before forming a pricing policy, it is necessary to determine the model of the market into which the enterprise intends to enter. There are several market models: pure competition market, pure monopoly market, monopolistic competition market, oligopolistic competition.

Characteristic features of the pure competition market model are the many sellers and buyers of any similar product. No buyer or seller has a significant influence on the level of market prices. There are usually no obstacles to entering such a market. The costs of developing a price policy are minimal, since the price level is determined by the relationship between supply and demand.

Pure monopoly market model. In this case, one enterprise is the only producer and seller, there is price control, and entry into such a market may be blocked. With this model, no special pricing mechanism is required.

Monopolistic competition market model. With this market model, there is a relatively large number of sellers and buyers, easy conditions for entering the market, and some control over prices within very narrow limits. Such a market requires marketing research and the development of a specific pricing policy. In oligopolistic competition, a small number of enterprises enter the market and dominate the market. They prefer to negotiate prices, setting a convenient trading margin and dividing the market into zones of influence. This model requires a careful pricing mechanism.

The main stages of the pricing process are: setting pricing objectives; determining the level of demand; determination of costs; analysis of prices for competitors' products; selection of pricing methods; setting the final price. Pricing objectives are determined by the overall goals of the enterprise. The main objectives of pricing can be: survival in the market (ensuring sales); profit maximization; maximizing market share; gaining leadership in product quality; orientation to the existing market situation.

If an enterprise operates in a highly competitive environment, when there are many manufacturers with similar products on the market, the main task is to ensure sales (survival). When choosing a pricing policy, marketers must study the pricing policies and prices of their competitors, and the quality of their products. If an enterprise's product is of lower quality than its competitor's, it cannot charge the same price as a competitor. Reduced prices, market penetration prices are usually used in cases where price demand buyers are flexible, elastic; if the enterprise wants to achieve maximum growth in sales volume and increase the total profit by slightly reducing the profit from each unit of goods; if the enterprise assumes that an increase in sales volume will reduce the relative costs of production and sales; if low prices reduce the level of competition; if there is a large consumption market, as well as when trying to capture a large market share.

The main objectives of an enterprise to maximize profits can be: establishing a stable income corresponding to the average profit for several years; calculation of price growth, and, consequently, profit due to the increase in the cost of capital investments; the desire to quickly obtain an initial profit if the enterprise is not confident in the favorable development of the business or lacks Money. When focusing on maximizing profits, the company must choose the appropriate price (high level). Typically, in such cases, current performance is more important than long-term performance.

When fulfilling the task of maximizing market share, the enterprise must ensure an increase in sales volumes. This goal is set on the assumption that a large market share will have low costs and high long-term profit margins in the future. Here you need to know for what period of time you need to reduce prices and to what level.

When solving the problem of achieving market leadership in product quality, it is necessary to give the goods new properties, increase their durability, reliability, etc. To do this, it is necessary to carry out research and development work, which usually leads to high costs and high prices. Improving the quality of products allows you to outperform competitors, but in this case, high prices should be considered by buyers as quite acceptable.

If the goal of pricing is to focus on the existing market position, unfavorable moves by competitors should be avoided. So, if competitors have reduced the price in order to gain a larger market share, then the enterprise must also reduce it to the limits possible for itself. The opposite situation may also occur, when the price level increases.

The next step in the pricing process is to determine the level of demand. To determine how sensitive demand is to changes in price, a demand curve should be derived for each product, which allows one to establish the relationship between price, demand and supply and characterize the elasticity of demand. There is an inversely proportional relationship between price and demand, when an increase in price decreases demand or, conversely, a decrease in price leads to an increase in demand. This dependence is called elastic, flexible. But it may also happen that an increase in price will lead to an increase in demand. Typically, this situation occurs when buyers believe that high prices correspond to higher quality goods. At this stage, the main task of the marketer is to establish the relationship between price and demand (elastic or inelastic); setting a limit for increasing or decreasing the price at which demand increases; determining the quantitative relationship between price and demand and calculating the elasticity coefficient. Based on this stage, the maximum price of the product is determined.

Costs have a significant impact on the pricing policy of an enterprise. At the cost estimation stage, the minimum price that can be set for the product should be determined. The minimum price for a product is determined by the costs of production of the product, its distribution and sales channels, including the rate of profit. Costs can be fixed, variable or gross. Fixed costs are expenses that remain unchanged (salaries, rent, heat supply, interest payments, etc.). They are always present, regardless of the form of the enterprise and the level of production.

Variable costs change in direct proportion to the level of production. For example, when manufacturing mobile phones, an enterprise incurs costs for the purchase of special equipment, plastics, conductors, packaging, etc. Per unit of production, these costs usually remain unchanged. They are called variables because they total amount varies depending on the number of units of products. Gross costs are the sum of fixed and variable costs at each specific level of production. The company strives to receive an amount for the product that would at least cover all gross production costs.

Marginal cost is the incremental or incremental cost associated with producing each additional unit of output over a given level of output. Marginal costs make it possible to determine the unit of production on which the company should focus its attention: change the unit price of the product, reduce or increase production.

If costs are reduced, the company can reduce its price or increase its profit share. If costs increase, it is possible to shift their increase to the buyer by increasing prices, provided that there is demand for the product, or modify the product in order to reduce their costs and maintain the price level, or increase them, or remove the product from production as unprofitable. The price must cover the costs, otherwise there is no point in producing the product. This requires the establishment and analysis of factors affecting production costs and the cost of certain types of products.

When choosing distribution channels, in order to successfully cooperate with participants in distribution channels, you should take into account the need to cover costs and make a profit both at your own enterprise and with the intermediary: provide price guarantees, especially when introducing a new product to the market, provide sales promotion measures.

The next steps in the pricing process are to analyze the prices of competitors' products and select a pricing method. The prices set by competitors largely determine the pricing strategy of the enterprise, so they should be carefully analyzed. As a rule, buyers prefer a product whose price corresponds to the level of quality. To analyze competitors' prices, you can use both expert assessments of enterprise specialists and a survey of customers themselves. By comparing the quality indicators and prices of competitors with similar indicators of their own enterprise, marketers must draw certain conclusions about the price level.

Price adjustment occurs through changes in price lists, the use of markups, allowances, discounts, and compensations. Implementation of pricing policy, development of pricing strategy, and their practical implementation require highly qualified employees of marketing services, responsibility for decisions made and a creative approach.