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 policy | Description |
| Establish pricing objectives | Define specific goals that align with the overall business strategy, considering market, competition and cost structure. |
| Market and competitive analysis | Analyze the market, including customer segments and preferences and assess competitors’ pricing strategies. |
| Cost analysis | Calculate the costs associated with product development, production, marketing and distribution. |
| Pricing method selection | Choose a pricing method or strategy, such as cost-plus pricing, value-based pricing, skimming, or penetration pricing. |
| Price setting | Set the initial price based on the chosen method, considering the desired profit margins and perceived customer value. |
| Pricing implementation | Implement the chosen pricing strategy, ensuring it is communicated effectively to customers and stakeholders. |
| Monitor and adjust | Continuously monitor the market, competition and internal factors and be prepared to adjust pricing as needed to achieve objectives. |
| Compliance and ethical considerations | Ensure pricing practices comply with legal regulations and ethical standards, avoiding anti-competitive or deceptive practices. |