Hi friends,

I am Jyoti from India. here I am going to participate in the SEC S21 W5 contest:https://steemit.com/costs-s21w4/@yolvijrm/slc-or-s21w5-or-costos-para-emprendedores-fijacion-de-precios organised by @yolvijrm

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Costs for entrepreneurs - Pricing

What is the importance of the pricing process?

The pricing process is the approach businesses use to determine what prices to charge for their products and services. It involves analyzing market and customer demand, understanding customer needs, estimating production costs, and setting competitive prices that maximize profits.

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Pricing is important in any organisation since it directly affects profitability and consumer perception. Pricing is crucial for several reasons.

• Customer perception
• competitive
• Profitable
• Market Positioning
• Sales Volume

Customer perception

It involves analyzing the market, including the target audience, their buying behavior, the competitive landscape, and how other products or services are priced in the industry.

Competitive

Competitive pricing is one of the most important business strategy. It involves setting prices for goods or services based on the prices of similar products offered by competitors.

Success enterpruners use this pricing strategy to gain benefits over theircompetitors and increase growth. Competitor-based pricing involves understanding market conditions and competitors' pricing policies, consumer preferences, and production costs.

Companies need to consider what the competition is charging for similar products or services and what their target audience will buy from them rather than from their competitors. Therefore, it is essential to be aware of current market trends and features and what customers expect from affordable prices.

Profitable

Pricing is helpful to make a profit in any business. Businesses should consider their overall profit goals when developing a pricing strategy. They should set prices that cover all the costs associated with producing or providing a product or service while still leaving enough room for profit. On the other hand, setting prices too low can reduce revenue, so companies must consider their profit margins to remain competitive.

Market Positioning

Link your product to its unique or competitive price. This works best if your brand offers it at a low price, but it can also be used if you fill a gap in the market at a specific price point.

The pricing analyzes your current product position in the market. You can't change your brand without first understanding where you stand.

Sales Volume

By setting a price, if the quality of our products or services is in line with the price, its sales volume also increases. And if our price is slightly lower than the prices of other competitors in the market, the sales volume of our products also increases.

What aspects should be considered when establishing the price of a product or service?

Prodution Cost

Cost analysis thoroughly reviews the direct and indirect costs that determine the final price of a product or service. These include manufacturing costs, labor, overhead, and many other factors. This analysis helps identify significant cost variances and helps you negotiate a fair price with suppliers.

Market Target

Your target market is defined by a group of consumers based on age, gender, location, socioeconomic status, and other criteria. Understanding who your customers are and what they want helps you determine what product price they are willing to pay.

Competitive Pricing

This concept refers to the customer’s list of preferences rather than your product. By identifying direct and indirect competitors, you will learn about the competitive strength of your products. Consider the preferences of your target audience, product features, and pricing strategies of your competitors when setting prices.

Product Value

The overall value of a product is determined by how well it meets or exceeds customer expectations. This value influences both product design and pricing strategy. Companies use product value to prioritize improvements and to improve targeting and brand messaging.

Market Demand

Market demand is the entire quantity of a product or service that customers in a specific market are willing to purchase at a particular price. And also the trend or seasonal requiremant for example festival season like crishtmas. Demand-based pricing, often known as dynamic pricing, is a pricing approach that adjusts prices based on current demand levels.

Provide examples of businesses that fit the pricing methods explained in class, stating your reasons.

Cost Plus Pricing

Example: Tata Tata Motors

While leading the automobile industry in European and American countries, India's TATA Motors is a global competitor through its pricing strategy. TATA is also the third-largest manufacturer of heavy vehicles in the world.

The reason for this is that they take a profit at a slightly higher percentage than their production cost, while at the same time employing other strategies to reduce production costs.

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Pricing the value

Example: ROYAL ENFIELD
Companies determine the price of their products by maintaining their prestige. If a product has a high value and influence among the people, people want to keep that product in their possession and are ready to pay any price for it. In this way, ROYAL ENFIELD's Bullet two-wheelers are seen as a value in the market today because of their efficiency and value.

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Competitive Pricing

Example: DMART
Competitive pricing is a very important factor for the growth of our business. In that sense, DMART Company is growing exponentially because they set very competitive prices for their products and sell them in the market. This is why they are establishing their shopping malls in more and more cities in India.

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The company Steemians invests $130,000 in the equipment needed for its production to enable the production and subsequent sale of the new product. A return of 20% on the value of the investment is expected. The expected sales level for next year is 21,000 units.

As per my calculation the percentage of profit we should add is 4.92%

Yes, it is possible to compete because to make the needed profit, the company needs charge $26.23 per unit, whereas its competitor sells the same product for $28. The Steemian company's price is $1.76 lower than the other, allowing it to fully compete because the low price provides more sale than the competitors. In this instance, they are more inclined to choose our product due to its lower cost.

Furthermore, despite its low price, Steemians Company generates a 24.92% return. Because the $26.23 price already contains the required margin, Steemians maintains profitability while appealing to price-conscious market consumers.

I would like to invite

@eliany

@goodybest

@ulfatulrahmah

to take part in this contest.