C Satapathy - Transfer Pricing - Impact on Taxation and Profits
Pricing for Profits
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Transcript of Pricing for Profits
![Page 1: Pricing for Profits](https://reader036.fdocuments.us/reader036/viewer/2022082422/56812ca7550346895d915065/html5/thumbnails/1.jpg)
Pricing for Profits
Factors affecting price
Pricing Policies
Pricing Strategies
Pricing Techniques
Do you have what it takes?
Markup
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Factors Affecting Price
Economic Factors Businesses Involved in Distribution Competition Cost and Expenses
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Economic Factors
Supply: the amount of a good or service that the producers are willing to provide.
The producers are more willing to supply products/services in greater amounts when prices are high; less willing to do so when prices are low
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Economic Factors
Demand: the amount of a good or service that buyers are willing to purchase.
Buyers are more willing to purchase products/services in greater amounts when prices are low; less willing to do so when prices are high
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Channels of Distribution
Each business that is involved in the distribution of a product raises the price of the product.
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Competition
How the competition is pricing their product/service may determine how YOU will price yours.
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Costs and Expenses
In order to make a profit, your prices must be set so that they will exceed your costs and expenses.
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Pricing Strategies
Cost-based pricing Demand-based pricing Competition-based pricing
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Cost-based Pricing
Cost of the product+ Cost of doing business+ Projected profit margin
= Customer price
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Demand-based Pricing
Set your price according to what customers are willing to pay
Must have a good understanding of consumer’s perception of the product/service
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Competition-based Pricing
Determine your competitor’s pricing
After this, you must decide to: Price below the competition Price in line with competition Price above the competition
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Pricing Policies
One-Price Policy: All customers pay the same
Flexible-Price Policy: Customers can negotiate for the best deal they can get
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Pricing Techniques
Psychological Pricing: Uses price to affect the customers’ perceptions of a product/service
Discount Pricing: Offers reductions from the usual price of product/service
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Pricing Techniques
Psychological Pricing
Prestige pricing: higher than average to suggest exclusiveness, status, prestige
Odd/Even pricing Odd prices suggest bargains Even pricing suggest higher quality
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Pricing Techniques
Discount Pricing Cash: encourages customers to pay bills
early Quantity: offered to buyers for placing large
orders Seasonal: offered to buyers who are willing
to buy in advance of customary buying season
Promotional: offered to buyers who are willing to promote a product/service
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Markup
1. Amount added to the cost of an item to cover expenses and ensure profit
2. Not generally decided on an item-by-item basis
3. A standard percentage
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Markup Percentage
1. Based on amount the business needs per item to cover expenses
2. Matches the markup of competitors
3. Based on the average markup for the industry
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Markup Percentage
= Percentage of Markup
Markup__________
Cost
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Retail Price
Cost x Markup % = $ Markup
$Markup + Cost = Retail Price