INTRODUCTION

Product, price, place, and promotion, basic elements within a marketing plan,
recognized as the "4Ps". In this first moment, we will clarify the meaning of the
variable price.
The price encompasses decisions about expenses and margins, price list, discounts,
discounts and bonuses, credits to customers, etc. It is a flexible tool and can be
set from a minimum to a maximum. When establishing a policy of
Prices must be taken into account that price and benefit go hand in hand, the higher the price,
greater benefit, although it is easier to sell at a low price than a high one.
In this present essay, as already mentioned, the aim is to expose the topic of price.
in which it will be explained what it is, its main pricing strategies, its
internal and external factors that affect pricing decisions, as well as
analyze the pricing process

PRICE
To define price, we can consult the dictionary of the RAE - Royal Academy.
Spanish and we will find:
Monetary value in which something is estimated.

Monetary consideration.
In the first definition, pecuniary refers to cash and in both
definitions money fulfills its function as a medium of exchange, the buyer delivers
money for receiving something and the seller receives it in representation of the value delivered.
So, we could say that the price refers to the amount of money that a
a buyer is willing to pay or exchange with a seller to acquire the
product or service and thus meet the need or obtain a benefit and the values and/or
utilities that this means for him.

PRICING METHODS
The company is forced to set the price of a product at the moment when it
launches it to the market or introduces it in a new segment or in a new channel of
distribution. At that moment, they have to make a crucial decision for the life of that
product and, therefore, must be extremely careful in the analysis of all
involved elements.
To set prices, the company must follow six steps beforehand:
1. Determine the Marketing objectives: as we have been saying, the price
is part of the company's global strategy and, specifically, of the strategy
of Marketing, so it has to be closely related to the plans
of this department.
2. Estimate the demand: you must analyze the possible quantities that can be sold.
at that determined price.
3. Calculate the cost variation based on the different levels of production
possible.
4. Examine the competition: you must know the prices, costs, and offers of the
competitors to have valid references and possibilities to foresee scenarios
futures, in order to be able to react to changes in the competition.
5. Determine the pricing system that will be followed.
6. Select the final price taking into account the influence of other elements
Marketing Mix about it.
As mentioned at some point, it is about making money, so the price
it will always be determined by costs, at a minimum, but not only by them. A
Next, we will see what types of systems can be followed for the establishment.
of the prices of our products.

Cost-based methods
It is considered the most objective. It consists of setting a margin on the
cost of the product or in setting a target price that provides a
established performance level. It is a very simple system that does not consider in a
principle other factors that could allow changing the price even having it more
route. The calculation is made based on the analysis of the variable costs incurred in the
manufacturing of the product, to which the proportional part of fixed expenses is added.
company.
This system is very similar to the pricing establishment by setting a target of
profitability; that is to say, the company indicates the level of profitability it wants to achieve and

based on that it establishes the prices of the products. It is also about a

objective system but entails the same risks as cost fixation.

Competency-based methods
It involves setting prices according to the prices established by competitors. They vary.
depending on the position the company has, whether as a leader or a follower, the quality of the product

or service provided and the contractual form of the purchase and sale.

In this case, it is the large companies in the sector that set the trend and the
the others follow them. In this way, the limits within which they must operate are defined.
prices for the product to be purchased by the buyer. Here are the advantages
differentials become the weapon used to extract some margin
additional information about competitor prices.
When a sector sets the limits within which a product can be purchased by
the market, the company must start to act on the rest of the variables to
to increase the efficiency in their production and commercial processes, that is,
reduce costs to increase margins or achieve higher sales.

Methods based on perceived value

They are based on consumer behavior and the perception that it has.
has of the product and the market. Once the minimum price that we
determine the cost of the product, the manufacturer can use the concept of value
perceived by the customer in order to vary the price based on that perception.
Value-based pricing means that the price should represent a
high value offer for consumers. The perception that the consumer has of
Our products depend, to a large extent, on the appropriate use that the company makes.
from their marketing tools to achieve that perception of value to be
high and, therefore, the consumer is willing to pay a higher price.
The most important aspect of this pricing system, evidently, is to determine
with accuracy what perception the consumer has of our product. If we believe
that the perception is greater than what it actually is, we will set a price
excessively high and vice versa.
Internal factors that influence the price

1. Company policies and objectives

The strategies set by the Board of Directors will determine the guidelines,
methods and times in achieving the objectives.
The company's strategy will determine the different variables of the Marketing Mix.
(Positioning, discount policy, promotion, market...) of the same and by
so it will greatly influence the final price.

2. Financial policy
Economic availabilities will decisively influence the structures of
company, type of product, and needs and income that will undoubtedly affect the price
of the product.
The financial resources of a company and its borrowing capacity will go to
conditionally and decisively influence the type of product and, above all, the phases of
execution of the various operational and commercial processes. The financial factor is
turns into the basic and necessary fuel to tackle the project. Its
influence is extremely important for the determination of the final price.
3. Personnel Policy
The company's labor structures will determine and influence the price of the
products. The staffing structure of a company and its flexibility
They will condition an important part of the product's cost and, therefore, the final price.
Fixed structures sometimes allow for a more solidified learning curve and
more efficient levels of activity, but in other cases, that lack of flexibility leads us
leads to lower levels of efficiency and flexibility in task performance, with the
consequent cut in margins and the need for final adjustments in the final price.
4. Company's product portfolio
The situation of the current product portfolio will determine the need for treasury.
which will undoubtedly affect the desired income level.
The product matrix of the Boston Consulting Group (BCG) indicates the degree of
contribution/need for funds of those products to the company. Without a doubt, this
it will also affect the financial situation of the company and, therefore, our ability to move
in the price range that the product launched to the market can withstand. It
we will see in a chapter later.
5. Learning curve
The experience and accumulated costs in product design will be factors to consider.
very much in mind when launching a product. This is closely tied to the
concept of product cost, which will undoubtedly represent the minimum threshold of the price
to offer to the market.
The experience in the production of products and the skill of the staff in the preparation
from them creates economies of scale that allow for a more comfortable position
to the manufacturer to determine the price.
6. Distribution policy
The product's marketing channels will significantly influence the
final price of the product. The distribution margins include very high surcharges.
significant about the final price to the consumer. It is necessary to distinguish between:

Own marketing: where the costs of these structures are controlled

by the manufacturer itself and the margins tend to be tighter.
Third-party marketing: where margins make the final price an amount
which in many cases doubles the value of the product at origin. It also influences
in this case the vertical dimension of the distribution chain.

External factors that influence the price

Current legislation.
Although our legal system allows for price freedom and prohibits
specifically that companies in a sector agree on setting prices to avoid
the competition among themselves, there are still some cases in which there is a certain
regulation in them (fundamentally in the services offered by organizations
public, such as municipal transport
2. The competition.
The price will be set by the company based on the composition or structure of costs
the same, but always without forgetting the market reference. The competition and the
substitute products will define the framework from which we can
move us to the setting of the final price. This limitation will force the company to
adapt their productive structures to be able to go to the market with prices
accepted by the client, but always with the minimum required profitability to be able to
continue offering this product. Often companies must give up on
his attempt to remove certain products due to having structures and processes with costs
higher than the income that the price, imposed by the market, can generate.
3. Economic agents involved in the production process.
From product design to sale to the end user, there is a process that is sometimes
long and complex in which numerous agents are involved that make up the
links in this chain that also affect price fixation.
Intermediaries.
Suppliers.
Clients.
Market structure.

Analysis of the process for price setting

In this sense, the company must examine the relationship that may arise between its
offer and that of its competitors, with the price level established by the
competition the intermediate reference for the entity's pricing.
The number of competitors in the market area where it is planned to establish,
relationship with the potential market, will give you an indicator of the need for a
company. Of course, if existing companies are not providing
suitable services or products, a new competitor will capture a part
substantial of the market.
When identifying competitors, it is important to know that they can be direct or
indirect competitors. It is easy to know who their direct competitors are, given that they sell the

same product or service as you. On the other hand, indirect competitors are the
they sell products or services to their market although not exactly the same. It is
to say they they compete for the money market.

CONCLUSION
To conclude, we must take into account the costs to set the price.
Considering that if the costs are high, the selling price may fall outside.
of the market and if they are low, applying the margin on the cost results in the selling price.
lower than that applied in the sector, which implies a reduction in profit that is
possible to achieve, as well as knowing the maximum price that can be established in the
competition, analyze the advantages and disadvantages that the company presents regarding
to the competition to set prices above, below or equal to them
established by her, and finally regarding the price received by buyers if it is
lower than what the company considers profitable, it must reduce costs or relocate
to another activity.
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