Page 25 - MARKETING MIX

PRICING

General

Pricing

Approach

The price the company charges is

somewhere between one that is too low

to produce a profit and one that is too

high to produce sufficient demand.

Companies set prices by selecting a

general pricing approach including one

or more of these sets of factors.

Cost-Based Pricing

In the case of goods, the prices are often based on the cost of produc‐

tion. For example, the price of petrol or diesel in Malaysia is based on the

cost of oil in the international markets. Similarly, in the case of serv ices,

the cost-based pricing serves as the basic or starting point for the

services. Cost-based prices are calculated based on certain

accumulation of the accounting data.

Cost as a percentage of selling price is commonly used pricing technique

in the restaurant industry. In these case, some restaurant managers

target a certain food cost, then price their menu items accordingly. Under

this method, price of the product is fixed by adding the amount of desired

profit margin to the cost of the product.

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