Price policy of the company
Price is the exchange value of a commodity (service),expressed in money equivalent. It is formed under the influence of two economic phenomena: supply and demand. With a large volume of goods on the market and low purchasing power, the price is set low. And, on the contrary, the combination of a deficit with a high demand leads to an increase in the cost of the product.
How different factors can influence the supplyand purchasing power? And how is the pricing policy of the company regulated? For example, consider a company that produces coffee. Due to strong frosts, most of the crop is dying. The situation on the market is a deficit of coffee. The firm, in order to increase its profits, begins to raise the level of prices. Buyers who do not have the opportunity to purchase coffee for this price, choose an alternative product (tea, chicory, etc.). Similarly, new volumes of supply and demand will be installed in the market, the equilibrium price will increase in this case. The reason for such a reaction of buyers is the limited funds. Therefore, people try to buy low-cost alternative goods. At the same time, they will satisfy more of their needs than if they bought coffee.
Pricing policy in marketing is one of the most important tools to achieve corporate goals. It performs three main functions for the firm:
1. Determines the amount of sales. How many people will have the desire and opportunity to buy goods with these consumer properties. At a lower cost, sales will be higher.
2. Defines the unit profit per unit of product. The higher the price, the greater profit the producer will receive.
3. Supports other marketing tools. The price policy is not the only determining factor of profit. The revenue is affected, for example, by the number of outlets. In this case, the sales volume increases. But a large number of stores also leads to an increase in costs, and they reduce the size of net profit.
The price policy should correspond to the purposes,which the company wants to achieve. Usually they are associated with the receipt of a certain amount of profit, sales. The company's goal may also be survival in the market, victory over competitors, establishment of a certain image, etc.
The company can form a price, counting onobtaining a certain profit in the short or long term. When the firm plans to increase its income for a period of more than 1 year, then it is necessary to set goals in addition for a shorter period of time (month, quarter, etc.).
The company's pricing policy can be formedtaking into account the increase in sales. But it is worth considering that in this case it is necessary to reduce the unit costs for the output of a unit of production. The increase in sales implies an increase in market share, a victory in competition and a high income in the long run.
Price policy, corresponding to the positionsurvival, is established in periods of heightened competition. The company in this case has large stocks of products, high production capacity and small sales. The company's goal is to increase sales to get revenue from finished products stored in warehouses.
Thus, the company's pricing policycompletely depends on the goals that she wants to achieve in the end. The increase in profits is due to the increase in prices, and survival and sales growth - by lowering the cost.
The buyers for each company is the oneor a different image - the image. It depends on what price and quality it sells the product, and also how polite and competent people work in it.