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Abstract

Contents

Introduction

Price plays a special role in a market economy. It reflects the entire system of price-forming factors (inflation, demand, supply, etc.). Pricing is a complex mechanism of the trading market, its barometer. What are the basic principles of market pricing? This is a constant orientation of prices to customer demand, to reduce their level in the competition, strengthening the link between prices and product quality and the possibility of after-sales service to consumers, price maneuvering.

In modern conditions, the relevance of pricing issues of export and import transactions is significantly increasing. Improving the accuracy of price calculations in contracts will contribute to the efficiency of concluded transactions. The profitability of enterprises, their competitiveness, the volume of sales of products and many other indicators of economic activity largely depend on the correctness of setting prices.

1. Relevance of the topic

The Relevance of the topic lies in the fact that prices are the basis of all economic measurements, have a significant impact on the costs and results of all economic entities: and business structures, and households, and the national economy as a whole. Prices determine the effectiveness of foreign economic activity.

2. Purpose and objectives of the study, planned results

The aim of the study is to Refine the theoretical and methodological foundations and form methodological recommendations for optimizing the pricing process at the enterprises.

Main objectives of the study:

  1. To rthe theoretical aspects of the concepts of price and pricing.
  2. Describe methods for creating product prices.
  3. Describe approaches to pricing.
  4. Give the concept and highlight the types of pricing strategies.
  5. To analyze the product prices and pricing strategies.

Object of research: the process of forming the price of products.

Subject of research: theoretical foundations and methodological and applied approaches to pricing in the enterprise.

3. Concept and types of prices

In the usual sense, the price is a monetary expression of the value of the goods. Pricing is the most important element of any company's activity. The Ee value is determined by the following factors. The attitude of consumers to price is important, since the role of non-price factors in making a purchase decision is often the least significant compared to the influence of price [1]. Prices operating in the economy are interconnected and form a dynamic system consisting of a number of interdependent and interacting blocks [2]:

· wholesale prices;

· prices for construction products;

· the purchase price (agricultural);

· retail prices;

· tariffs for communication vehicles.

A change in prices in one of these main blocks leads to a change in prices in other blocks. Prices are classified:

· Depending on the industries and sectors of the economy they serve.

· Depending on the area of operation.

· Depending on the order of reimbursement by the consumer of transport costs for the delivery of goods.

· According to the degree of freedom from the influence of the state in determining them.

· Depending on the degree of novelty of the product.

· On the basis of servicing foreign trade turnover.

· Based on usage in accounting and statistics.

Usually consumer goods go through three stages of product distribution:

· the enterprise - wholesale trade;

· wholesale - retail trade;

· retail - consumers.

According to these stages of commodity movement, there are three main types of prices:

· Wholesale price (selling price) of the enterprise - the price at which the goods leave the enterprise. It consists of the cost of production and contains the profit of the enterprise.

· The wholesale price of industry (trade) is the price at which wholesale firms sell goods to small-scale wholesale and retail enterprises.

· The retail price is the price at which the product arrives at the end consumer.

Wholesale price is the price at which the products of enterprises are sold and purchased in the order of wholesale turnover. The methods of calculating the price-oriented competition are:

· determination of the price by following retail prices;

· following the prices of the leading company;

· the use of the primary, taken at the market prices;

· the establishment of prestigious prices;

· competitive method (auction) used in the markets.

The company needs to know the prices and quality of its competitors ' products. After studying them, the company decides on its own pricing: if its product is similar to the products of the main competitor, then it must set a price close to the price of the competitor's product, in order to avoid loss of sales; if the quality of its products is higher than similar products of competitors, then it is advisable to set higher prices; if the quality is lower, then the prices should be lower than those of competitors.

There are a number of methods for setting the initial price of a product:

  1. Cost (a fixed percentage of profit is added to the production costs).
  2. Aggregate (the price is determined by summing up the prices for individual structural elements of the product).
  3. With a focus on demand.
  4. Based on the analysis of break-even production and ensuring target profit.
  5. With a focus on competition.
  6. Assortment pricing.

4. Approaches to pricing

Any price set by the company will somehow affect the level of demand for the product. The relationship between the price and the resulting level of demand is represented by the well-known demand curve[3]. The curve shows how much of the product will be sold on the market over a certain period of time at different prices. In a normal situation, demand and price are inversely proportional (the higher the price, the lower the demand). However, in the case of a prestigious product, the demand curve may have a positive slope (when consumers consider a high price to be an indicator of high quality), but if the price is set too high, sales may decline again.

From the consumer's point of view, the price of a product (or service) appears to be nothing more than the seller's interpretation, expressed in monetary terms. Finally, the consumer considers the price of the goods as acceptable (equal to his own idea of the value of the goods in rubles or other currency) or notes that it is higher or lower than acceptable. If buyers believe that the price is too high, they resist buying the product. If the price seems low to them, then the purchase is considered as profitable (although a low price may cause the buyer to doubt the quality of the product).

What is important to consider when forming prices? What should be the initial price of the product, and how to change the initial price to make a profit and increase the share of sales of their products in the market? Different approaches are used, which are dictated by the overall strategy.

The specifics of the approach to setting the price of a product or service are also in the pricing policy of the enterprise, in the fact that the consumer is firmly confident in his company. For example, a company sells cheap products. It will not dramatically increase the price of a new product, and if it introduces it to the market, the price will be quite acceptable. This became possible with the regulation of prices by the state. In advanced economies, the state seeks to limit monopolistically high prices and enacts various antitrust laws.

On the contrary, in the market of fuel and raw materials, prices are more dependent on cyclical, general economic and conjunctural fluctuations, as well as speculative trends. Therefore, the ups and downs in the economy are always accompanied by a sensitive price reaction of the extractive industries[5].

To a large extent, the price also depends on the phase of the product's life cycle. So, for machines and equipment at the stage of the origin of the life cycle, the maximum, but elastic price is usually used.

5. Concept and types of pricing strategies

The company's price policy is the basis for developing its pricing strategy. Pricing strategies are part of the company's overall development strategy. Pricing strategy is a set of practical factors and methods that it is advisable to adhere to when setting market prices for specific types of products produced by an enterprise.

The main types of pricing strategies are[7]:

  1. High Price Strategy

    Цthe goal of this strategy is to obtain superprofits by skimming those buyers for whom the new product has a great value and who are willing to pay more than the normal market price for the purchased product. This applies to products that are at the initial stage of the life cycle. By setting high prices, the manufacturer uses its temporary monopoly on the product. Pricing policy during the period of high prices — to maximize profits until the market for new products has become an object of competition. The strategy of high prices is also used by the company for the purpose of testing its product, its price, and gradually approaching an acceptable price level[8].

  2. Medium Price Strategy (neutral pricing)

    It is applicable to all phases of the life cycle, except decline, and is most typical for most firms that consider profit-making as a long-term policy.

  3. The strategy of low prices (the strategy of price breakout)

    The strategy can be applied at any phase of the life cycle. It is especially effective when the price elasticity of demand is high. The strategy of low prices is aimed at obtaining long-term, rather than fast profits.

  4. Target Price Strategy

    With this strategy, no matter how prices change, sales volumes, the mass of profit should be constant, that is, profit is the target value. It is used mainly by large corporations.

  5. Preferential pricing strategy

    The goal is to increase sales. It is used at the end of the product life cycle and manifests itself in the application of various discounts.

  6. The strategy of associated pricing

    When using this strategy, when setting prices, they are guided by the so-called consumption price, which is equal to the sum of the price of the product and the cost of its operation.

  7. The strategy of following the leader

    The essence of this strategy does not involve setting prices for new products in strict accordance with the price level of the leading company in the market. Only the price policy of the industry or market leader is taken into account. The price of a new product may deviate from the price of the leading company, but within certain limits, which are dictated by quality and technical superiority. The smaller the differences in the company's new products compared to the majority of products offered on the market, the closer the price level for new products is to the prices set by the industry leader.

From time to time, firms feel the need to change the prices of their products. Price reductions can occur for the following reasons: underutilization of production capacity, reduction of market share under the influence of strong competition, the desire of the company to achieve a dominant position in the market.

Price increases are due to sustained inflation or excessive demand. The reaction of consumers to price changes should be taken into account by firms.

Conclusions

The price affects the characteristics of the product, the methods of its promotion and distribution channels, as well as all these factors affect the price. The company does not just set a single price, but rather creates a whole pricing system that covers the prices of various products in their range. The pricing structure changes at the same time as the product goes through its life cycle. The company adjusts product prices based on costs and demand, taking into account different situations and customer needs.

In the course of the study, we defined the price and pricing strategy. Issues such as the impact of competition on price determination were highlighted. To tell about price information and its role in making decisions on setting the price value. We briefly listed the types of costs that are taken into account in pricing. They talked about the features of cost accounting when setting prices for innovative products. They pointed to the role of the state in innovation and its support in setting prices for innovative goods and services.

Thus, the most flexible and significant tool of the company's commercial policy is the price, the level of which has a different effect on all the main indicators that characterize the quantitative and qualitative results of the company's activities (profit, profitability, turnover, market share, image, etc.).

The correct method of setting the price, reasonable pricing tactics, consistent implementation of a well-founded pricing strategy are the necessary components of the successful operation of any commercial enterprise in the harsh conditions of market relations.

When setting the price determining factors are: the cost of goods that meet company profit margins, competitors prices and price of substitutes, analogues of the product, the state of effective demand, the requirements of government and other public institutions, the uniqueness of certain qualities of the product.

List of sources

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