Competitors
A large influence on pricing decisions. The relative market shares (or market strength) of competitors influences whether a business can set prices alone , or whether it has to follow the direction shown by competitors
Costs
A business cannot overlook the cost of production or buy a product when anchoring a selling price. In the long-term, a business will fail if it sells for a shorter cost or if its gross earnings margin is too low to cover the business's fixed costs.
The state of the market for the product
If there is a high need for the product, but a lack of supply, then the business can put prices up.
The state of the economy
Some products are more perceptive to changes in unemployment and workers' salaries than others. Makers of waste products will need to drop prices particularly when the economy is in a downturn.
Market Positioning
The price that you set for your product or service will create a brand thought in the eyes of your possible customer. For example, you can place yourself as a low-cost leader, where consumers will know that cheap price is your strongest weapon.
question 2
What new products have you purchased recently that were priced using either a penetration or a skimming approach? And which pricing approaches do you feel work best in long term? Explain your answer
1) Recently, I bought iPhone 12 pro max that will a skimming approach pricing. Why apple is a skimming approach pricing? So, with skimming, apple prices are set high to maximize profits in the short term by targeting the consumers most interested in your product. In the beginning, apple makes less but more profitable sales because only early and enthusiastic buyers are ready to pay more. Then, the price is regularly reduced over time to bring customers on a budget, who are happy to buy your highly respected product for a “bargain”.
2) I think the penetration price approaching is the best for the long term because in this you may offer a low price in the beginning to attract the more customer, So you made a lot of customers in the beginning and you get a good sale. They will rapidly penetrate the market to bring down their unit cost and also they will build a loyal customer based. So that's why i think penetration pricing approach is best for the long term.
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