Know the importance of complete pricing for business
In a business activity or buying and selling certainly will be related to the price of the price both selling prices and purchase prices. The price is a very important actor so that there are transactions between producers and consumers. Therefore, complete pricing is very important for business trips because prices become a way of companies to achieve targets.
Price’s Determination Strategy
Because prices are very important for businesses and companies, then each company will carry out various strategies in setting the best prices. In a strategy to set prices, generally divided by the type of product, new products or products that have been circulating. The following is a brief explanation of the strategy in making pricing.
1. Cost Oriented Pricing (Determination of Based on Cost Approach)
It is the most common way that is widely used by the company, namely by determining the selling price based on costs incurred for production and adding a particular percentage as a profit. There are three groups in making prices for this model, namely:
- Cost Plus Pricing Method (Method of Determining Cost-Plus), namely the Determination of Many Costs carried out by production companies. The calculation by how the selling price per product unit is calculated by summing up all unit fees plus a certain amount as the desired profit. (Formula: Total cost + profit = selling price)
- Mark-up pricing (Mark-up price setting method) is a pricing made by just by adding profit, this method is done by intermediary traders because they have no production costs. (Formula: buy price + markup = selling price)
- Target pricing, is a price determination based on the desired level of investment (ROI).
2. Demand-oriented pricing (pricing based on the needs / request approach)
According to Djaslim Saladin (2003: 96) demand-oriented pricing is a pricing by considering the state of demand, market conditions and consumer desires. Demand-oriented pricing is based on demand behavior, for example high prices if demand is very strong and low prices when demand is weak.
To respond to various kinds of consumers who want a product, then the usual way is taken by holding price discrimination. Various types of price discrimination that can be done for example are discrimination against territorial (region), customer groups (customers), time and quality or product form.
3. Competition Oriented Pricing (Determination of Based on Competition Approach)
Competition Oriented Pricing is a pricing based on the price set by competitors, this is done especially for homogeneous products. Some price setting methods that can be mentioned as follows:
- Perceived Value Pricing, which is a pricing where the company tries to set a price of level with the average industry.
- Sealed bid pricing is a pricing based on the bid submitted by competitors.
Purpose of Pricing
Every company must aim to get a necessity that has been calculated from the product or service. So to achieve this goal, a company will determine the price for the products or services. In addition there are several objectives of the pricing to be achieved by a company, namely:
1. Maximizing profits or profits
Maximizing profits or profits to be achieved by a company is the main goal of product or service pricing. To get a profit or profit to the maximum, a company certainly has to set a large range of ranges from the purchase price and production price of an item. The greater the range, the greater the profit.
But in determining the range and prices certainly cannot be done that easy, because it will have an impact on several other factors such as market capabilities in buying products or services sold. So that a company must take care of carefully the right selling price to be released to the market in order to get the maximum profit.
2. Get and maintain the market
Getting the attraction and getting a market is also one of the purposes of a company in determining the price to be released. A company must map the target and purchasing power of the market. So the company can determine the right price to be released on the market because it sets the right price can also attract market attention.
Although it remains behavior at the initial goal to get a profit profit, but a company must still see the market capabilities to buy according to predefined prices, so companies can attract market attention. Getting and maintaining the owned market also means that it is important for a company to benefit.
3. Return of Investment or Return of Business Capital
In addition to getting a profit, a company also definitely has a purpose to be able to make a return of business capital quickly. A company certainly targets how to get a high level of return of investment. So the company can immediately have a net advantage as it becomes the initial goal. The way to get a high return of investment is certainly by getting big profits.
To get a big profit, of course the sales figures that must be achieved by the company must also be large. However, in order to reach a large sales figure, the company certainly does not set a high price that results in the market unable to reach. If this happens, instead of getting profits and doing ROI, the company can actually lose.
4. Perform Price Stability
Setting a selling price of a product also aims to be able to carry out price stability. As an illustration, if in a market, a company decreases selling prices, indirectly will force its competitors to do the same. This can have a positive and negative impact, especially for some very sensitive industries such as petroleum.
Price stability does not only have an impact on a company but also to other companies engaged in the same industry. The importance of price stability is to prevent price wars that can occur. In addition, with price stability it can also maintain the integrity of a company and bring up healthy competition.
5. Maintain the continuity and integrity of the company
A company can determine the price with a very low extreme point with the aim of hooking as many markets as possible and defeating competitors. Or vice versa the extreme point is very high in order to get the big profit. But such actions are actually very dangerous because they can threaten the continuity and integrity of the company.
Both in any extreme point, even though the aim is good, it can have a negative impact on the company. Very low extreme price points make the company unable to close operational prices. While the price point is too high makes the company not get a market. This is what makes the proper pricing very important.
Pricing for a business is very important, especially to maintain the operational sustainability of the business. With good planning, you can determine the price that will interlock each other for your business, as well as for consumers. The most important thing you have to do is record all costs or cost on each product or service you sell.
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