The essence of pricing
A major contributing factor in pricing is the cost and the demand. In Economics cost is called the cost of production and sales in cash. The cost is divided into actual and planned.
Planned cost includes the cost of the level of technology and organization of production. Is the use of equipment, consumption of materials, energy use, labor.
The actual cost includes expenditure that is relevant to the performance of operations on product, organization and management of production process. Also in the definition of the price of the mortgaged and other costs: taxes, mortgage payments, costs of training, travel, rent, contributions to the funds, depreciation of intangible assets, payments for insurance.
In addition to production costs, on a component of the final price is also affected by non-manufacturing, commercial factor. These types of costs to determine the wholesale price of goods. It formed the basis of the selling price including the value added tax (VAT) and excise tax (for excisable goods).
The retail price is the final selling price to the consumer, with markups, including costs of trade enterprises and VAT merchant services.
The psychology of pricing
Price and quantity sold of a product determines the demand. The law of demand suggests that price is the main variable quantity of the product sold. More goods purchased at competitive prices and less at higher. But this variable would be alone, if in fact the number of sales did not affect other variables: the budget and tastes of the buyer, competitor prices, seasonality, advertising.
There are also many different discounts and promotions. But the definition of the demand for the commodity by comparing the price the buyer has a complicated structure. When resetting prices, there is a threshold beyond which a substantial increase in sales occurs. Therefore, the study of psychology of prices, not talking about spot price, and the price range.
Violation of the law of demand often occurs in expensive segments of the market. Here it is not seldom a high volume of sales at higher prices. This is due to the prestige and the maintenance of their own image. Significantly to the price of the product affects the brand. Purchase branded prices significantly increase sales. And as already known, the volume of sales determines the level of prices.