Selecting an appropriate pricing strategy
Abstract
"Consumers and competitors easily can access pricing information for goods sold at retail and use this information for various purposes. One example is that a product's price can signal its perceived quality. Consumers may view a high-priced product as high quality and a low-priced product as low quality. This "price-quality signaling" ultimately can affect consumer purchasing behavior. For example, whether a high-priced product is made from high-quality materials does not matter necessarily because its high price signals to consumers that the product's inputs have good quality. The perceived high quality may then motivate consumers to buy the product. Because price is so highly visible and it shapes consumer perceptions and behaviors, the pricing strategy you choose for your value-added agricultural product is critical. ... Completely understanding production costs, profit objectives, customers, competition and other market information helps you determine the pricing strategy that best fits your product and company. With this information, you know the minimum price you can charge to break even and the maximum price you can charge based on customer demand. Together, costs and demand estimates indicate the flexibility you have when pricing your product. You can ultimately set a price after considering the prices your competitors charge and the profit objectives you set for your business."--First page.
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