Price Determination: 6 Factors Affecting Price Determination of…

Hong Kong

High prices are signals for producers to produce more and for buyers to buy less. Low prices are signals for pro- ducers to produce less and for buyers to buy more. prices, the economy would not run as smoothly, and decisions about allocating goods and services would have to be made some other way.

• Product Cost:
• The Utility and Demand:
• Extent of Competition in the Market:
• Government and Legal Regulations:
• Pricing Objectives:
• Marketing Methods Used:

Price has a relative effect: some consumers are sensitive to price, whereas others do not consider the price when making a purchase decision (Sangadji and Sopiah, 2013). Consumers tend to associate price with product level, that is, a perceived high price reflects high quality and vice versa.

It’s a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. If there is an increase in supply for goods and services while demand remains the same, prices tend to fall to a lower equilibrium price and a higher equilibrium quantity of goods and services.

A drop in price to zero means the investor loses his or her entire investment – a return of -100%. Because the stock is worthless, the investor holding a short position does not have to buy back the shares and return them to the lender (usually a broker), which means the short position gains a 100% return.

If the price is too high, the supply will be greater than demand, and producers will be stuck with the excess. For example, if the market for a good is already in equilibrium and producers raise prices, consumers will buy fewer units than they did in equilibrium, and fewer units than producers have available for sale.

When prices are too high, items per order will likely decrease. When prices are too high, price per item purchased will significantly increase. When prices are too high, average order value grows.

Your Price Is Too High! Five Tips for Handling the Most Common Sales Objection

1. Step 1: Talk it over first.
2. Step 2: Be 100% committed.
3. Step 3: Don’t assume anything.
4. Step 4: Find out what “too high” really means.
5. Last but most definitely not least, listen to the answer the client gives you.

Tips on how you can respond

1. Start a conversation. The good news is that when someone says you’re too expensive, it needn’t always be the end of the conversation.
2. Acknowledge that you’re expensive.
3. Focus on the return on investment (ROI)
4. Ask yourself: “Is this my ideal client?”
5. When a client genuinely can’t afford you.

These studies have consistently shown that there is a positive effect of price on consumers’ perceptions of quality. When the price is high, consumers perceive high product quality.

7. When different qualities of the product are important, price can only be used as a measure of the quality desired by the market. In other words, a consumer can only use price as a measure of quality if the consumer’s values are reflected by other consumers in the market.

The answer is, premium pricing. Shortly it means that a company puts a higher price on a product and expects customers to think it’s somehow better than the other ones on the market (better quality or reputation). And at the same time low cost means low quality but it also means good value for the customers.

The Cost of Quality can be divided into four categories. They include Prevention, Appraisal, Internal Failure and External Failure. Within each of the four categories there are numerous possible sources of cost related to good or poor quality.

Cost of quality (COQ) is defined as a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality, that appraise the quality of the organization’s products or services, and that result from internal and external failures.

Appraisal Costs: Including testing, inspection, audits, reviews and surveys, etc. Failure Costs: Internal Failures: Including scrap, rework, expediting, equipment downtime, injuries, etc. External Failures: Including product recalls, returned products, complaint handling, lost sales, etc.

Which is not a cost of quality? Extended service and contract costs- The costs of quality can be classified as prevention, appraisal, and failure (both internal and external). Extended service contracts are not quality costs.

Prevention costs: The costs incurred to avoid or minimize the number of defects at first place are known as prevention costs. Some examples of prevention costs are improvement of manufacturing processes, workers training, quality engineering, statistical process control etc.

Cost of Quality = P C + A C + IFC + EFC

1. The cost of good quality is represented as CoGQ.
2. The cost of poor quality is represented as CoPQ.
3. The prevention cost is represented as PC.
4. The appraisal costs are represented by AC;
5. The internal failure costs are represented by IFC.

COPQ formula Determine the time period that you’re evaluating- this will narrow the scope of your data. Then add together the total waste / variation and multiply that by the amount of time spent fixing an issue. The result value should be your company’s cost of poor quality.

Strictly defined, the cost of poor quality is the sum of internal and external failure costs categories. But this assumes that those elements of appraisal costs—e.g., 100 percent sorting inspection or review—necessitated by inadequate processes are classified under internal failures.

For example, in 1984, Garvin [16] has described quality from five different views: 1) Transcendental view: Quality, as synonymous with “innate excellence”, is something we can recognize but not define; 2) User view: This is a personal, subjective view of quality, which lies in the eyes of the beholders; i.e., quality …

The true concept of cost of quality is a financial measure of the quality performance of an organization, helping to optimize the various costs to achieve the best quality achievable at a more reasonable price. In order to cut internal and external failure costs, prevention and appraisal costs must be increased.

Four Types of Cost of Quality Examples include inspection, testing, process or service audits, calibration of measuring and test equipment.

Perhaps the most important quality cost investment is prevention costs. Eliminating defects before production begins reduces the costs of quality and can help companies increase profits. Prevention costs include process planning, review and analysis of quality audits and training employees to prevent future failure.

Cost of quality, or COQ, refers to the total costs needed to bring products or services up to standards defined by project management professionals. To determine the cost of quality, combine the costs of conformance and the costs of non-conformance.

External failure costs are costs that are a result of delivering a defective product to the customer. These costs include warranty, repairs and replacements, product recalls, liabilities arising from legal action against a company, and lost sales arising from a reputation for poor quality.