The pricing is important in marketing. The advertisement need pricing also to specified the value of the product. The two (2) main things to consider when deciding pricing are costing & price charge.
Firstly, cost need to be covered in order for business to make profit.
Secondary, price charge will influence demand for the product. The demand is the desire of buyers to buy product in a given period of time. if there is less desire for buyers to buy particular item, it means the price is high so people won’t buy the product. Therefore, costing & price charge is two very important.
The situation for wholesaler & retailer is different from manufactures when calculating break-even point. The break-even point for manufactures depends on the quantity they make as this affect variable cost. The wholesalers and retailers simply have to decide on what quantity of goods they will buy-simply they a given a discount for buying in large quantity. This is when business buying in bulk.
The starting point for wholesaler and retailer is the price they pay for the goods. In the case of wholesaler is the price paid to the manufactures. In the case of retailer, is the price paid to the wholesaler. The wholesaler & retailer paid for transporting goods to their store. Their freight cost is the additional cost also.
Some retailer pay for insurance if they buy expensive goods. When calculating the selling price, retailers are allowed to base on the total cost of getting the goods into their store. This cost is known as cost-into –store (CIS), and is made up of whole saler cost plus the cost of freight, & insurance.
The mark up refers to the amount of money that is added into the CIS of goods in order to find the goods selling price. The size of mark-up will change depending on the type of goods and where the store is. It has to be big enough to help cover all the other cost of running the business, as well as leaving enough profit for the business person.
The mark up is expressed as the percentage. For examples, the mark up on the range of product may be 30% percent. If the particular good has a CIS of K100.00, then 30% is added on as the mark-up. This means that the selling price would be K130.00 (K100.00 + (30% of K100.00)).
The reduction in marked price of goods is called discount. The business usually sell their goods at the normal marked prices, but their a some situations when they a prepared to give a discount. This means that they will sell their product at the lower price. The most common type of discounts are trade discounts, sales discounts and cash discounts.
The trade discounts occurs when business buy in large quantity from another business ( cooperate customers). The purpose of trade discount is to encourage businesses to come & buy again in same business. If business not regular customers & want to buy in large quantities; it can be approved to give trade discounts.
The business offers sales promotion, this is when they reduce the sales price because some goods are slow to sell. They sell goods in a discounted price. The cash discount is given in a condition that someone who does not have account who buy expensive items.
A business or person who does have an account with the business doing the selling is usually given thirty days to pay the amount owing of the statement of account. Special items may be offered in order to encourage them to pay the amount earlier. For examples, if the amount owing is paid back within 14 days, a 2.5 percent discount may be offered. This encourage the customer to pay more quickly and allow a faster flow of cash into the business.