prissetting

Prissetting, or price setting, is the process by which a business determines the price at which it offers its products or services to customers. It combines analysis of costs, customer value, and market conditions to support financial goals and competitive positioning.

Key factors include costs and required margins; perceived value; price elasticity of demand; competition; customer segments; distribution channels; and legal or ethical constraints. Organizations choose objectives such as maximizing profit, gaining market share, or signaling quality.

Common methods include cost-based pricing (cost-plus), value-based pricing (pricing by perceived value), competition-based pricing, and dynamic pricing that adjusts to demand or external conditions. Additional approaches include tiered pricing, bundling, promotions, and psychological pricing.

Process: define pricing objectives; estimate demand and elasticity; determine costs and capacity; select a pricing method; set the final price; and monitor outcomes, updating as needed. Data analysis, market research, and pricing software or A/B testing support decisions.

Contexts and examples: consumer electronics may use value-based or dynamic pricing; airlines use dynamic fares; software services often use tiered subscriptions; retailers employ promotions and discounting.

Risks and considerations: mispricing can reduce profitability or damage brand; price wars; unequal impact on customer segments; regulatory or contract terms; currency and tax effects in international pricing.