The calculation is as follows-
This is often used in a market were there is little competition. A high price is set initially when the product gets a bit older people aren’t as willing to pay as high a price so the price is lowered. The large price at the start gives a feeling of high quality. This would not be very suitable for my product as there is two many competitors in the drinks market and this method is usually used on new hi-tech products.
This is where a low price is set initially in order to gain customers then the price increases when the customers realize the quality of the product. This method could be used for my sports drink product as I could set the price low to begin and then increase the price when the customers realize the quality of my product.
This method is designed to destroy competitor’s sales or to close down their business. This method is where a business sets an existing product or a new product at a radically low price to out do competitors. This is common for big supermarkets outdoing small corner shops. This method would not really suit my product as there is too many competitors to outdo in the drinks market.
Usually consists of two or more businesses continually lowering their prices to try to outdo each other works out for the customer as price is ridiculously low but not for the businesses as profits decrease.
This method would not really suit my product as I need to make as much money as possible not loss it.
- The factors that affect price
- Costs of production
The producer will have to calculate the total costs of making the product. The price of the product will rely on how high or low these costs are.
- Need to make profit
The aim in any business is to make profit, so the product must be priced at a rate that will cover all the costs of production and also make a profit for the business.
- Competition in the market
The aim is to set a price for your product that will encourage customers away from competitors. To achieve this the price is slightly lowered to begin and the increased when the customers start buying your product.
