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Pricing Strategy and Decision-Making

The price of an item is an important component of decision making in procurement, but is not the only factor for a final decision. Please review the overall components of a pricing strategy, and include examples from external research to support your views.

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Pricing strategies vary depending on the cost, customer, and even the competition. "Three main approaches a business takes to setting price: cost-based pricing, customer-based pricing and competitor-based pricing" (Tutor2u, 2012). Depending on the marketing strategy and the company involved will define which strategy works the best for the situation involved. Determining the cost of the product and what is involved to make the product from start to finish would be where many organizations decide what is the appropriate price to charge to the customer, accounting for an additional price for profits. This method is considered somewhat "old-fashioned" in that determining the price of a product through "adding a fixed amount or percentage to the cost of making or buying the product" is taking the chance that the company may out-price the product and make the item more costly than say the competitor sells the product for (Tutor2u, 2012). Using this strategy helps retailers in particular to know that the costs involved in creation of the product are covered along with what the gross profits will be. This also brings about the chance that the product is higher in price and thus could lead customers to the competition to buy the cheaper price product, since many consumers are ...

Solution Summary

The solution discusses the pricing strategy and decision making.