Are you an EPFL student looking for a semester project?
Work with us on data science and visualisation projects, and deploy your project as an app on top of Graph Search.
Concept
Pricing strategies
Summary
A business can use a variety of pricing strategies when selling a product or service. To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy. Pricing strategies and tactics vary from company to company, and also differ across countries, cultures, industries and over time, with the maturing of industries and markets and changes in wider economic conditions.
Pricing strategies determine the price companies set for their products. The price can be set to maximize profitability for each unit sold or from the market overall. It can also be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market. Pricing strategies can bring both competitive advantages and disadvantages to its firm and often dictate the success or failure of a business; thus, it is crucial to choose the right strategy.
Method of pricing in which all costs are recovered. The price of the product includes the variable cost of each item plus a proportionate amount of the fixed costs. The absorption pricing can be calculated via '(Unit Variable Costs + (Overhead + Managing Costs))/ Amount of units produced. Fixed/ Variable Costs, Direct/ Indirect Costs, Employee Salary, Utility Costs, and other types of costs can be calculated by applying the Absorption Pricing Method.
Contribution margin-based pricing
Contribution margin-based pricing maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs (the product's contribution margin per unit), and on one's assumptions regarding the relationship between the product's price and the number of units that can be sold at that price. The product's contribution to total firm profit (i.e. to operating income) is maximized when a price is chosen that maximizes the following:
(contribution margin per unit) × (number of units sold)
In cost-plus pricing, a company first determines its break-even price for the product.
Official source
About this result
This page is automatically generated and may contain information that is not correct, complete, up-to-date, or relevant to your search query. The same applies to every other page on this website. Please make sure to verify the information with EPFL's official sources.