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 :
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:
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.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
