Which of the following is the first step in setting a pricing policy?

By: Prof. Dr. Fazal Rehman Shamil | Last updated: February 3, 2024

 

Question:  Which of the following is the first step in setting a pricing policy?

A   Selecting a pricing method

B   Selecting the pricing objective

C   Determining demand

D   Estimating cost

Answer:     Selecting the pricing objective

 

Steps in setting a pricing policyDescription
Establish pricing objectivesDefine specific goals that align with the overall business strategy, considering market, competition and cost structure.
Market and competitive analysisAnalyze the market, including customer segments and preferences and assess competitors’ pricing strategies.
Cost analysisCalculate the costs associated with product development, production, marketing and distribution.
Pricing method selectionChoose a pricing method or strategy, such as cost-plus pricing, value-based pricing, skimming, or penetration pricing.
 Price settingSet the initial price based on the chosen method, considering the desired profit margins and perceived customer value.
Pricing implementationImplement the chosen pricing strategy, ensuring it is communicated effectively to customers and stakeholders.
Monitor and adjustContinuously monitor the market, competition and internal factors and be prepared to adjust pricing as needed to achieve objectives.
Compliance and ethical considerationsEnsure pricing practices comply with legal regulations and ethical standards, avoiding anti-competitive or deceptive practices.