Price

• In centrally planned economy, the prices is fixed authoritatively by the public authorities, according to whether they estimate that a product is useful (the price is subsidized) or vermin at the company (the product is increased).
  

• In certain situations (as in a saving in war), or in certain systems interventionists (planned economy), the authorities resort to the " control prix" , or at least of certain prices charged on the market, or influential on the offer (Protectionism, Subsidy…) or asks it (Rationnement).

The freedom of the prices never exists in fact, in particular because of the impact of the taxation which relates to them in their respective markets.

Price policy

For a given company the decision of the choice of the selling price of a product is delicate because, an high price can get important unit margins but risk to discourage the request. Contrary a low unit price gets weak unit margins but can generate sales in greater quantities. Actually the fixing of a selling price concerns a whole of factors whose principal ones are the costs, the request and competition.

approach by the costs

The selling price is then fixed by raising the cost price of a given percentage. It is a usual method in particular in the trade. It is necessary simply to take guard so that the price thus fixed does not discourage the consumers. In industry a problem appears because of variability of the cost prices with the produced quantities. The use of a cost " normal" (cost of rational charge) as calculation bases thus seems preferable.

approach by the request

The required quantities vary according to the prices charged by the company (elasticity of the request compared to the prices). In general the prices and the required quantities vary in opposite direction because when the price goes up the required quantities are weaker. Knowledge of elasticities/price makes it possible the company to fix its price in order to obtain the greatest market share and/or the greatest benefit.

Accordingly knowledge of the zones of acceptability and the psychological prices plays a big role.

• the Prix of acceptability is a price that the greatest number of Consommateur S is laid out to pay. It is generally estimated after an investigation near these consumers.
• It should be also known that there exist psychological thresholds (round prices) and magic prices (9,99 for example). The crossing of a psychological threshold makes fall the request.

approach by competition

The idea is here to refer at the prices charged by the competitors. When there exists a leader on the market or when there exists an unquestionable contract price undertaken is often brought to position their prices and can then choose either to expensive sell (strategy of image) or to sell less expensive (war of price).

differentiated pricing practice

The companies practice sometimes different prices for the same product: according to the ordered quantities, or quality of the customers (commercial, particular), or areas of sale (France, export), etc In the field them services it can exist more subtle criteria such as the period of sale (hotel trade, transport, cinemas, etc), the category of the customer (cinemas) or even the behavior of purchase (hiring of cars). The limits of these practices are commercial and legal. Commercially one does not need only the customers who pay less expensive make flee the others. From a legal point of view the prices constitute a very regulated field.

the price of the new product

There exist three strategies of price for a company during launchings of a product on the market:

1. the Strategy of penetration which corresponds to fix a low price at those practiced by the competition (regarded as disguised publicity),
2. strategy of alignment which corresponds to the fact of fixing prices equal to competition and finally
3. strategy of creaming the purpose of which is to fix a price higher than competition (qualitative research).

Trend of prices

The trend of prices is measured by the Inflation.

There exist various indication of price for each price concerned:

• the prices the consumer are measured by the Consumer price index (IPC or in English, CPI).
• the producer prices are measured separately, and correspond to the Production costs.

For a good, one speaks about nominal Prix when one refers to the price expressed in a Monnaie given. One speaks about real Prix when one extracts from the nominal price the share due to the evolution of the currency, i.e. inflation.

See too

• Value
• Fair price
• Currency
• Mix-marketing

Simple: Price