Price flexibility: understanding, strategy and for example in business
Price is a value given to a product or service and is the result of a series of calculations, research and complex understanding and the ability to risk.
Pricing strategies include considering segments, paying ability, market conditions, competitors, trade margins, and input costs. It is targeted at the specified customer and against competitors.
Developing pricing strategies can be one of the most challenging tasks facing business. Prices need to be set high enough to cover the cost of the product while providing benefits for business.
However, prices must remain in the range they are willing to be paid by customers. Flexible pricing strategies allow businesses to adjust prices quickly as needed to accommodate changing business climates or to overcome competition challenges.
The price flexibility strategy also empowers customers to negotiate prices based on their business size or purchasing power.
To find out about what price flexibility is further, you can read it further in this article:
Understanding of flexible prices or price flexibility
Flexible price determination or price flexibility is the pricing practice of a product or service through negotiations between buyers and sellers, in a certain range.
This is one of the many different price strategies used by management to stimulate demand and income.
In other words, customers and sellers can gather and try to change prices, namely lowering or raising prices. Flexible pricing does not only apply to the price of goods but also service. In fact, this is a very common strategy in special services made.
If done correctly, the company can sell their products at a higher price and with a more number of Banuak from the beginning. Flexible price policy or price flexibility is standard practice in most strategies to improve income management.
This term can also refer to adapting someone’s price closer to market strength. Market strength is the power of supply and demand.
When demand goes up or the offer decreases, the price rises. Conversely, when demand decreases or offers increases, prices go down.
Strategy in building flexible prices
Visit your competitor’s web site and retail shop. Record the price they sell for similar products. If the price of your competitor is not available on their website, it works with other people in the industry to ask about competitors’ price structures. Does competitors are low-cost leaders, known as their best services?
Understanding how your competitors position themselves compared to your business will help you develop flexible pricing strategies.
Monitor your competitor’s price pattern for future reference and monitoring in your business plan.
Determine product costs
To determine the flexibility determination strategy of price, businesses must first understand the cost of the product and related sales and overhead costs. Combine material costs, production, overhead costs and sales costs to arrive at the costs needed to produce and sell products commonly known as HPP or product sales prices.
Determine pricing goals
Establishing the right flexible price setting strategy for your business has an impact on the overall income for the business.
Use business objectives to set the overall profit goals for that year. The benefits needed by business can help you determine the amount of markup needed to meet the purpose of profit.
Determine the initial percentage markup by adding operating costs, reduction and profits together and dividing it with a net sales and expenses.
Reduction must include adjustment of inventory, discount of employees or customers. Use the percentage markup to get the initial price.
Run estimated volume and profit to see if the estimated price provides the benefits needed by business. Compare the prices needed by business with competition.
Use the initial product price to develop a flexible selling price range that provides the benefits needed by business but accommodates different customer purchasing situations. For example, customers who buy large amounts of products can buy products with a 10 percent discount from the price paid by customers who buy small amounts.
Examples of price flexibility in business
For example customers request services from hotels, which are usually not provided. Therefore there is no price specified so that it is open to negotiations.
In this case the hotel can operate with flexible price policies that allow customers to buy menu items at an additional cost. Customers with this will evaluate prices according to him other prices known for these products or services.
Another example is a carpenter, for example, collecting customers according to the amount of adjustment requested by the customer. Carpenters also take into account how much he believes can be purchased by customers.
Customers then negotiate prices according to their understanding of the market.
Then there is also Last-Minute Flights. Empty airline seats for flights that take off in two hours, for example, are one of the vulnerable services or products. After the flight takes off, you cannot sell it.
If airline employees can negotiate with consumers directly, the company will most likely sell the empty seat. In other words, flexible pricing strategies help sell tickets in the last minute.
Flexible pricing is different from fixed pricing. Determination remains common between large companies and retailers. If you go to a large supermarket, you cannot negotiate the price of goods to be sold.
The importance of price flexibility in business
Most customers like flexible prices from price flexibility strategies. If your business can affect prices, you can easier find what consumers are looking at affordable prices.
Instead of facing binary choices, namely buying or not buying, there are other options. Another option is to try to get a better price.
Flexible price determination strategies JYGA is often used by companies, which aims to gain competitive advantage.
Flexible pricing allows price segmentation by offering a different segment with different rates.
Companies can offer similar products at suitable prices for each buyer. Flexible pricing policies allow business to adjust prices quickly as needed to accommodate changing business climates or to overcome competition challenges.
But as we describe before, in making pricing on a product there are several points and methods that you must pay attention to and to make it easier for you to determine the price on a product you are required to calculate the overall cost for each product or service you sell.
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