Arrange the following step of pricing process in a logical order : A. Analyse competitiors’ price B. Estimate demand and revenue C. Select pricing method D. Assess pricing objectives E. Determine Cost Choose the correct answer from the options given below :
D, B, E, A, C
The correct sequence is D, B, E, A, C — option 3.
| Order | Step | What it establishes |
|---|---|---|
| 1 | D — Assess pricing objectives | What the price is meant to achieve — survival, current profit maximisation, market-share leadership, product-quality leadership or market skimming |
| 2 | B — Estimate demand and revenue | The ceiling — how much buyers will pay and how quantity responds to price |
| 3 | E — Determine cost | The floor — below which the firm makes a loss |
| 4 | A — Analyse competitors’ prices | Where, between floor and ceiling, the price should sit relative to rivals |
| 5 | C — Select the pricing method | The technique that converts all of the above into a number — mark-up, target return, perceived value, going rate, or sealed bid |
The structure of the sequence. Kotler’s six-step procedure is built around three reference points, and the order is not arbitrary :
Costs set the floor — competitors’ prices set the orientation — customers’ perception of value sets the ceiling.
The objective must come first, because it determines what the other information will be used for — a firm pricing for market share reads the same demand curve quite differently from one pricing for current profit. Demand and cost then bracket the feasible range, competitors position the firm within it, and only then can a method be applied. The final step in the full procedure is selecting the actual price.
Why option 1 and option 4 fail immediately : both begin with competitor analysis, which cannot precede knowing one’s own objective, demand or cost. Option 2 puts cost last, after the method has been chosen, which reverses the dependency.
The pricing methods, briefly.
| Method | Basis |
|---|---|
| Mark-up / cost-plus | Cost plus a standard margin — simple, but ignores demand |
| Target return | The price that yields a required return on investment |
| Perceived value | What the buyer believes the offering is worth |
| Going rate | Follows competitors — common in oligopoly |
| Sealed bid | Set by expectation of rivals’ bids, as in tendering |
Hence, the answer is D, B, E, A, C.
Similar Questions
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
The practice of selling below cost, with an intention to destroying the competitor is referred to as :
Select the correct sequence of steps in setting a pricing policy:
(a) Determining Demand
(b) Analysing competitors' costs, prices and offers
(c) Selecting the Final Price
(d) Selecting the Pricing Objective
(e) Estimating costs
(f) Selecting a pricing method
Codes:
The price setting method most closely corresponding to the concept of product positioning is:
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Match the items of the following two lists and indicate the correct code:
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List - I List - II (a) Customer-segment pricing (i) Pricing products differently but not proportionately to their costs (b) Product-form pricing (ii) Pricing products differently even though the cost of offering at that arena is the same (c) Location pricing (iii) Pricing differently even though the products are the same (d) Time pricing (iv) Pricing differently for the different seasons A market penetration pricing strategy is suitable when
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 is the characteristic of price?
In which of the following price adjustment strategies. a company reduces prices to reward customer responses such as volume purchases, paying early or promoting the product?
The consumer's price sensitivity is / are influenced by
A. Who bears the cost
B. What percentage of total expenditure does the product represent
C. Who bears the cost and type of retailer from where customer purchases
D. Consumption of product by the customer
E. Knowledge about the product
Choose the most appropriate answer from the options given below:
- Which of the following are the informal pricing methods ?
I. Cost plus
II. Competitive
III. Rate of return
IV. Trial and error
Codes :
