Greetings from
Sitaraindaryas (Mahnoor)

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Greetings friends, welcome to the new week of steemit learning challenge and i hope all of you will enjoying this week. I am also participate in this week and make sure my participation for different challenges. Now am going to participate in one of the challenge. Today in which i am discuss on pricing process.

What is the importance of the pricing process?

The pricing process is the very important for any company or any business because as it has the direct impact on it's profitability, it's competitiveness, and it's success & value in the market. Below are the some of reasons that why the pricing process is important for any business and company.

Profitability & Competitiveness

Because of the profitability and the competitiveness it is very important for our business. Because the price of product determines the profitability of the business. And price that is too low can lead to the losses, while the price that is too high can deter clients. So, it is the key factor in market competition. Because a business that offers competitive prices can attract more clients and can increase it's market share.

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Perceived value & Demand:

It is also very important because of the perceived and demand. Because the price that set for a product influences client's perception of it's value. And the high price may suggest for high quality, while a low price may suggest for the low quality. The price of a product can also influence on demand. Because price that is too high may decrease the demand, while the price that is too low may increase the demand. The pricing process allows companies to be the flexible and adapt to changes in market, competition or economy.

Marketing strategy & Cost Analysis.

It is also the key element in a business's marketing strategy that can be used as a tool to attract the more clients, to create a brand images or differentiate a product from those of the competition. The process of pricing involves the analyzing costs of producing, distributing, and it's marketing. That's helps businesses to better understand their costs and make informed pricing decisions as well.

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In conclusion, the pricing process is very important for any business because it's influences on profitability, competitiveness, perceived value, demand, marketing strategy and cost analysis.

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What aspects should be considered when establishing the price of a product or service?

When we setting the price of any product, there are several aspects that we have need to be consider. Here in the below there are some of the most important i mentioned.

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Costs & Perceived value

It is very essential to consider all the costs that associated with the production, distribution and the marketing of product, including the fixed and variable costs. The price should be reflect the values that customers perceive in the product. This may can include factors such as the quality, innovation, convenience, and the exclusivity.

Competition & Demand

It is also important to analyze the competitors' prices and consider how the product will be positioned in the market. It is also for demand of the product must also be considered when we setting the price. Because a price that is too high may can decrease the demand, while the price that is too low may can increase the demand.

Company objectives & Market segment

It is also impact on the company objectives, such as the profit maximization or the market penetration, it should also be considered when the setting price and the price must be appropriate for the market segments to which the product directed for the business low or high quality.

Pricing Policies Taxes

The business should consider it's pricing policies such as the discount policy, the promotional pricing policy and the bulk pricing policy. They also consider the government taxes and regulations that should also be considered when setting pricing.

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Provide examples of businesses that fit the pricing methods explained in class, stating your reasons.

Below are some examples of businesses that fit the pricing methods that was explained in the class, such as the cost based pricing method, Demand based pricing methods, competition based pricing methods, Value based pricing methods and Market penetration pricing method that are am discuss in the below.

Cost-based pricing method

For the help of this method i will manage my business of home construction company. Behind the Reason of using this method is the cost of materials, labor, and overhead is very high, so the company needs to set a price that covers these costs and generates a reasonable profit.

Demand-based pricing method

Demand based pricing methods use in such type business such as ticket sales company for sporting events because the demand for tickets to sporting events is very high, especially for important matches or finals. The company can set a higher price for tickets due to the high demand.

Competition-based pricing method

This method would be best for the online clothing sales company. Because competition in the online clothing market is very high, so the company needs to set a competitive price to attract peoples & customers. The company can research on the prices of competitors and set a similar or slightly lower price from them.

Value-based pricing method

It would be used in the marketing consulting firm because the marketing consulting firm offers high-quality, value-added services to it's clients & customers. The firm can charge a higher price for it's services because of the value they offer to thier clients.

Market penetration pricing method

It would be use in the electronic products sales company because the electronics sales company wants to penetrate the market and attract many customers. The company can set a lower price for its products to attract customers and gain market share.

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The company Steemians invests 130,000$ in the equipment needed for its production to enable the production and subsequent sale of the new product. A return of 20% on the value of the investment is expected. The expected sales level for next year is 21,000 units.

What should be the percentage of profit that should be added to a total unit production cost of 25.00$ to achieve the desired profitability?

To calculate the percentage of profit that should be added to a total unit production cost of 25.00$, we can follow these steps such as, the calculate the total expected utility, calculate the expected unit utility, calculate the unit sales price and also calculate the profit percentage. As i calculate in the below.

Calculate the total expected utility

Total expected utility = Investment x Profitability
Total expected utility = 130,000 x 20%
Total expected utility = 26,000$

Calculate the expected unit utility

Expected unit profit = Expected total profit / Expected sales level
Expected unit profit = 26,000 / 21,000 units
Expected unit profit = 1.24$

Calculate the unit sales price

Unit sales price = Total unit cost of production + Expected unit profit
Unit sales price = 25.00 + 1.24
Unit sales price = 26.24$

Calculate the profit percentage

Profit percentage = (Expected unit profit / Total unit cost of production) x 100
Profit percentage = (1.24 / 25.00) x 100
Profit percentage = 4.96%

Therefore, the percentage of profit that should be added to a total unit production cost of 25.00$ to achieve the desired profitability is will be 4.96%.

At what price should we enter the domestic market?

According to the my calculations that i made on above, the unit sales price would be 26.24$. However, it is also important to consider the other factors before determining the final sale price to the domestic market, such as, the competition in the market and it's demand for the product, brand image value and clients perception of value, the distribution and marketing costs.

Assuming these that there are no more other factors to influencing the price, so a domestic market selling price of 26.24$ could be very considered. However, the business may want to consider a rounded price as well, such as 26.00$ & 26.50$, to facilitate the marketing and the promotion of the product and our business.

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If the competition has a price of $28.00 for a product with similar characteristics, would it be possible to compete?

With the selling price of 26.24$, the Steemian's company would have a very competitive advantage in the terms of price, as their price is 6.3% lower than the competitive price that is 28.00$. This price difference could be very attractive to customers to looking for a similar products at the lower price.

However, it is also very important to consider the other factors that could influence on the client's purchasing decisions for example, the quality of Product, the company's brand, it's value and reputation in market, other customer services such as delivery and the product availability etc.

If the Steemian's company can offer the same product of the similar quality & features at the lower price, then it might be the possible to compete with the competition price. It is also very important to considered the company's marketing and it's sales strategy for ensure that the customers & clients are aware of the offer and can take advantage from it.

Now am inviting my friends @stef1, @suboohi, @josepha, @faran-nabeel for participating in this challenge.

Regards,
Sitaraindaryas