What are the seven price-setting methods? Briefly describe each of them

Question

What will be an ideal response?

Answer 1

The seven major price-setting methods are:
1. Markup pricing - This is the most elementary pricing method wherein a standard markup is added to the product's cost.
2. Target-return pricing - Here, the firm determines the price that yields its target rate of return on investment.
3. Perceived-value pricing - Perceived value is made up of a host of inputs, such as the buyer's image of the product performance, the channel deliverables, the warranty quality, customer support, and softer attributes such as the supplier's reputation, trustworthiness, and esteem. Companies must deliver the value promised by their value proposition, and the customer must perceive this value.
4. Value pricing - Companies win loyal customers by charging a fairly low price for a highly-quality offering. Value price requires reengineering the company's operations to become a low-cost producer without sacrificing quality, to attract a large number of value-conscious customers.
5. Everyday low pricing (EDLP) - EDLP is a retailing strategy in which the retailer charges a constant low price with little or no price promotion or special sales.
6. Going-rate pricing - Here, the firm bases its price largely on competitors' prices.
7. Auction-type pricing - There are three major types of auctions and their separate pricing procedures:
a. English auctions - These have one seller and many buyers. The highest bidder gets the item.
b. Dutch auctions - These feature descending bids. In the variation with one seller and many buyers, an auctioneer announces a high price for a product and then slowly decreases the price until a bidder accepts. In the other variation, with one buyer and many sellers, the buyer announces something he wants to buy, and potential sellers compete to offer the lowest price.
c. Sealed-bid auction - This lets would-be suppliers submit only one bid. The suppliers have no knowledge about the other bids.