A firm can also make its goods the most qualitative among all the rest offered in the market. Usually it demands to determine a higher price to cover the costs for reaching high quality and conducting expensive surveys.
To determine a price taking into account the level of current prices a firm usually leans on its competitors' prices and pays less attention to its own indexes of costs and demand. Under the circumstances of oligopoly activity all the firms usually ask for the same price. The smaller firms "follow the leader" changing their prices when the leader changers them, not concerning the fluctuations of the demand for their goods. Some firms can take off a small extra charge as a premium or grant a small discount keeping the difference in thepermanent price. Such method of pricing is quite popular.
The seller must take into account not only economic but also psychological factors of the price. Many consumers suppose that the price must reflect the quality of merchandises. Some firms manage to increase the sales by raising prices for their goods and such goods will be considered more prestigious. Such method of pricing based on the goods prestige is also quite effective, especially concerning, for instance, perfume or expensive cars that can cost ten times cheaper but customers pay ten times higher considering that the price assumes something special.
There exists one else, unofficial law of pricing, which is very popular practically among all the sellers. Price should be expressed in a odd figure. For example instead of $200 they put $199. And then for the plenty of consumers this merchandise will cost $100 and plus but not just $200.
The chosen price must be checked whether it corresponds to the existing price policy. Many firms work out purposes concerning their favorable price image granting discounts and taking relative measures in respond to the price activity of their competitors.
In recent several years plenty of the firms have to higher their prices. Doing so they understand that increase of prices will result in the displeasure of their customers, distributors and own sales personnel. Nevertheless, the successful increase of prices can considerably enlarge the volumes of profits.
One of the main condition affecting the increase in prices is the constant worldwide inflation caused by highering level of costs. The increase of costs not corresponding to the production growth leads to the decrease of the profits rate and makes the firms permanently higher prices. Some times the prices growth crosses the growth of costs in the presentiment of further inflation or introduction of the state control over prices. Firms are not sure to give their customers any long-run liabilities concerning prices, scaring that the inflation caused by costs growth will damage their profit rate. Overcoming inflation firms can increase their prices in several ways.
Another circumstance leading to the price increase is the availability of extra demand (it's especially typical for our country). When a firm is not able to completely satisfy their customers' needs it can raise its prices. Prices can be raised practically imperceptibly, for example by abolishing all the discounts and enriching the assortment with more expensive variants of goods.
So there are lots of problems in the existing pricing system. There are plenty of questions to be solved. That is why in the modern economy the problems of pricing are the matter of special concern.
The choice of the proper pricing policy is still the most difficult and important problem as in conditions of the country with high economic level as, to the great extend, in conditions of market reforms. Any enterprise financing stability completely depends on solving this problem as well as the output and profit rate and ability of investing at the expense of own resources.
The proper pricing policy is extremely important for national economy in general because the rational price structure and level contribute to the economic stability.
In the market economy all attention is for the first turn paid to the consumer that should be the main principal of pricing policy which in its turn should be considered as a part of the overall planning of the business activity process.
The constant appearance of new goods and services in the market is one of the main conditions to survive under the circumstances of hard competition. Otherwise, the leg-behind firms face the serious finance problems.
The modern market grants new challenges in determining prices and some innovations concerning this problem. One of the aspects here is orientation to the concrete customer concerning establishing so called "just that price" or "faire price". There is no doubt that such understanding of price is common for customer psychology. Some people consider prices as the ability to obtain consumer's benefits, other think that the price is very high. Sometimes such personal approach is called "moral pricing".
The right choice of the proper pricing strategy is the initial task for any company otherwise it can face the problems of finance loss and unprofitability.
So we can repeat once again that there are lots of problems in the existing pricing system. There exist plenty of questions to be considered and solved. That is why in the modern economy the problems of pricing are the matter of special concern. Pricing issues should be considered in complex taking account of special conditions of the modern market.