Table of Contents

• The method of price setting

This morning, I want to document The Method of Price Determination.

But, before reading further, you should look at previous pricing fundamental theory below:

1. Pricing in Marketing : http://marketingforbeginner.blogspot.com/2016/01/pricing-in-marketing.html
2. Pricing Objectives : http://marketingforbeginner.blogspot.com/2016/01/pricing-objectives-goal-of-pricing.html
3. Price Setting Factors : http://marketingforbeginner.blogspot.com/2016/01/price-setting-considerations.html
4. Things that affect pricing : http://marketingforbeginner.blogspot.com/2016/01/factors-that-affect-price-determination.html

Above are basic concept of pricing article. Let's continue on our main subject in this article.

The method of price setting

Determining a price is a complex activity to perform. It needs variety of factors, such as: product itself, market, distribution system, promotion, market demand estimation, budget, cost, etc. 

In addition to this, there are many method in setting a price. Therefore, as a marketer you have to understand this theory (price setting or price determination method) well.

The method of price determination are below:

1. Cost Oriented Method
2. Competition Oriented Method
3. Demand Oriented Method
4. Customer Oriented Method

Cost Oriented Method comprises:

• Mark-up pricing
• Return on investment pricing
• Break Even pricing
• Variable cost pricing
• Peak-load pricing

Competition Oriented Method comprises:

• Above market pricing
• Below market pricing
• Loss leader pricing
• Sealed bid pricing

Demand Oriented Method comprises:

• Profit Maximization pricing
• Income Maximization pricing
• Unit Volume Maximization pricing

Customer Oriented Method comprises:

• Industrial engineering pricing
• Discriminative pricing
• Perceived value pricing

Above are the list of pricing method that are stated in Marketing knowledge theory. I will explain one by one about the definition, the way to determine a price, and sample, and other detail information in the next article. So, stay tune in this blog. 

Now, I will take you to the next subject, Pricing strategy. 

Pricing Strategy

If you want to market your product, sell your product, introduce your product to the people, face a changing market, respond a competitor, and so on, first step you must fix is determining a price. 

In order to obtain appropriate pricing, you must have a correct strategy to determine a price. In marketing world, It is called pricing strategy. 

There are four types of pricing strategy:

1. Pricing strategy for new product
2. Pricing strategy for established product
3. Pricing strategy for competition based environment
4. Pricing strategy based on psychology 

Pricing strategy for new product consists of:

• Skimming pricing
• Penetration pricing
• Initial pricing

Pricing strategy for established product consists of:

• Preserve a price
• Reduce a price
• Increase a price

Pricing strategy based on psychology consists of:

• Promotional pricing
• Customary pricing
• Prestige pricing
• Price lining
• Demand-backward pricing
• Bundle pricing

 Pricing strategy for competition based environment consists of:

• Price position against quality ( benchmark to competitor )

 These are strategy for determining a price. I will explain you detail one by one in the next article.

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