S&P's Financial Focus

Pricing Strategies

When deciding on a price for merchandise, there are three basic strategies: cost-based pricing, demand-based pricing, and competition-based pricing. Following is information on each.

Make a Notebook Use this information to begin a notebook filled with information on business. Add dividers and illustrations to your notebook.

Cost-Based Pricing Using this strategy, you calculate price by figuring your costs to make or buy your product. You then add the related cost of doing business, and finally add your projected profit margin to arrive at a price.

Demand-Based Pricing You set the price based on the demand your customers are willing to pay for your product. This strategy is useful when your product is elastic or customers believe your product is different or better than that of your competitors.

Competition-Based Pricing First, you need to know what your competitors are charging, and then decide whether it is to your advantage to price below, in line with, or above the competition. To find out what your competition is charging, you can visit your competitors, read newspaper and magazine ads, watch television commercials, listen to radio ads, or check the Internet.

Standard and Poor’s publishes the globally recognized S&P 500® financial index and provides credit ratings. It also gathers financial statistics, information, and news, and analyzes this data to help individuals, companies, and governments make financial decisions. Go to www.standardandpoors.com to learn more about this company.