After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
Determine the demand of the product
Option 2 — Determine the demand of the product is correct.
Kotler lays out a six-step procedure for setting a price. After a firm decides WHY it is pricing (its objective — survival, maximum current profit, market-share leadership, etc.), the next logical step is to gauge how much customers are willing to buy, because demand sets the ceiling on price.
| Step | Activity |
|---|---|
| 1 | Selecting the pricing objective |
| 2 | Determining demand |
| 3 | Estimating costs |
| 4 | Analysing competitors' costs, prices and offers |
| 5 | Selecting a pricing method |
| 6 | Selecting the final price |
Demand and costs bracket the price: demand fixes the upper limit (what buyers will pay) and cost fixes the floor. Estimating costs (step 3), studying competitors (step 4) and choosing a method (step 5) all come later.
Takeaway: In Kotler's pricing sequence, demand determination immediately follows the setting of pricing objectives.
Similar Questions
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
The practice of selling below cost, with an intention to destroying the competitor is referred to as :
Cost - Plus pricing is not suitable for :
Match the items of List - I with that of List - II and suggest the correct code :
List - I (Pricing Strategies) List - II (Explanations) (a) Customary pricing (i) Ending a price with 99 paise (b) Skimming (ii) pricing a product based on perceived expectations of customers (c) Penetration pricing (iii) Setting a high price which gradually reduces as competitors enter the market (d) Psychological pricing (iv) Offering at a low price for a new product during its initial offering Code :
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
The practice of selling below cost, with an intention to destroying the competitor is referred to as:
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy?
When the Companies pay less attention to its own costs or demands and bases its price largely on competitors’ prices, then it is known as :
Match the items of the List-I with those of the List-II and suggest the correct code from the following:
List-I List-II i. Loss Leader a. Locational price differentials ii. Unchanged Pricing b. Products with high initial demands iii. Basing Point Pricing c. Product line pricing iv. Skimming Pricing d. Oligopoly pricing Codes:
Which one of the following will be the appropriate pricing strategy for a new product expecting an expanding market?
Important Questions from Pricing decisions
Pricing practice of setting a price target and then developing a product that would allow the firm to maximise total profit at that price is called:
- Which of the following are the informal pricing methods ?
I. Cost plus
II. Competitive
III. Rate of return
IV. Trial and error
Codes : Which among the following is not an internal factor in pricing decisions?
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
The practice of selling below cost, with an intention to destroying the competitor is referred to as :
