Price Determination Task

A Price Determination Task is a decisioning task to determine an offering value during a sales transaction.

• Context:
  • It can be solved by a Pricing System (that implements a pricing function).
  • It can range from being an Offline Pricing Task to being a Dynamic Pricing Task, depending on the flexibility and responsiveness required in the pricing strategy.
  • It can involve analyzing various factors, including price elasticity, manufacturing cost, market demand, competitive pricing, and consumer behavior.
  • It can (often) require input from micro-economic analysis to understand the impact of price changes on demand and supply.
  • It can (often) utilize financial modeling to forecast the impact of different pricing strategies on revenue and profitability.
  • It can (often) be influenced by the Four Ps of the marketing mix: Product, Price, Place, and Promotion, where price is critical for revenue generation.
  • It can (often) incorporate Business Distribution Strategies and cost centers to determine the most effective pricing model.
  • It can leverage data analytics to adjust prices in real-time based on market conditions.
  • ...
• Example(s):
  • determining the price of a Transportation Event such as an airline ticket or a ride-sharing service fare.
  • setting the subscription price for a Software as a Service (SaaS) product.
  • pricing a new consumer product in the retail industry.
  • dynamically pricing hotel rooms or event tickets based on demand and availability.
  • Financial Instrument Pricing (using financial instrument pricing functions).
  • ...
• Counter-Example(s):
  • a Product Recommendation Task, which focuses on suggesting products to customers.
  • a Logistics Task, which involves the management of the flow of goods.
  • a Marketing Task related to promoting products or services.
• See: Pricing Function, Price Elasticity, Micro-Economic Analysis, Manufacturing Cost, Financial Modeling, Four Ps, Marketing Mix, Distribution (Business), Cost Center (Business).

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References

2015

• (Wikipedia, 2024) ⇒ http://en.wikipedia.org/wiki/Pricing Retrieved:2015-2-24.
  • NOTES:
    • It involves a process where a business sets the price at which it will sell its products and services, often as part of a marketing plan.
    • It takes into account various factors such as acquisition costs, manufacturing costs, marketplace conditions, competition, brand, and product quality.
    • It is a key element of the marketing mix, alongside product, promotion, and place, and is the only element that generates revenue.
    • It can be manual or automatic, influenced by a range of factors including quantity breaks, promotions, specific vendor quotes, and market conditions.
    • It is crucial for converting consumer need into demand, relying on the consumer's willingness and capacity to buy the product.
    • It aims to achieve financial goals, fit marketplace realities, support product market positioning, and ensure price consistency across products for consumer confidence and satisfaction.
    • It is influenced by the type of distribution channel, promotional efforts, and product quality, with higher costs in these areas typically leading to higher prices.
    • It seeks an efficient price, one close to the maximum that customers are prepared to pay, often balancing between the price floor and price ceiling for optimal revenue and profit.
    • It encompasses various strategies, including operations-oriented, revenue-oriented, customer-oriented, value-based, relationship-oriented, and socially-oriented pricing, among others.

2015

• (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/Pricing Retrieved:2015-3-4.
  • Pricing is the process of determining what a company will receive in exchange for its product or service. Pricing factors are manufacturing cost, market place, competition, market condition, brand, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental aspect of financial modeling and is one of the four Ps of the marketing mix. (The other three aspects are product, promotion, and place.) Price is the only revenue generating element amongst the four Ps, the rest being cost centers. However, the other Ps of marketing will contribute to decreasing price elasticity and so enable price increases to drive greater revenue and profits.

    Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors. The needs of the consumer can be converted into demand only if the consumer has the willingness and capacity to buy the product. Thus pricing is very important in marketing.

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