The essence of the pricing process. The most important elements of the pricing methodology are the principles of pricing.
What is price?
Price is an economic term that does not require explanation or proof of its existence. It is at the household level that a person recognizes what price is and what function it plays in life as a whole from childhood, as soon as a person has to watch or engage in the purchase themselves. In the economy, there are tens of millions of prices. Price refers to a variety of prices, including wholesale and retail prices, regulated, contractual, free, market, state, contract, projection, project, limit, worldwide, and a variety of others, under a single idea. Prices are produced and operate differently in different economies due to their widespread use in all types of economies (centralized, market, mixed).
Prices are unquestionably a thin, flexible instrument and a powerful lever for regulating the economy, yet their true influence on the economy in general and on the quality of living in particular is far less than the hopes that people place in prices and the pricing system. It is required to separate and differentiate two interacting elements in the pricing mechanism. Pricing as a method, rules of establishment, formation of new prices, and changes to existing ones are on the one hand, prices themselves, their types, structure, size, and dynamics changes, and on the other hand, pricing as a method, rules of establishment, formation of new prices, and changes to existing ones.
Pricing, which is less well-known than prices, is an important aspect of the overall pricing process. It is, in reality, the factor that defines the price worth. However, pricing is frequently concealed from us, and prices are frequently hidden from us so that we can see them clearly. The price value mechanism is made up of prices and pricing.
The essence of the pricing process
Pricing is the process of setting prices for goods and services. In market pricing, the real process of price formation occurs not in production, not at the enterprise, but in the sphere of product sales, that is, at the market under the influence of supply and demand, commodity-money relations. Product price and its benefits are tested by the market and finally formed in the market. Each firm treats pricing issues differently. In small firms, prices are usually set by the chief executive. In large companies pricing problems are usually dealt with by middle-aged managers. However, even here the management provides general guidelines and forms policy goals and approves the prices proposed by the management of lower echelons. In industries, where pricing factors play a crucial role (aerospace industry, railways, oil industry, etc.), firms often create price departments that develop prices or help others do so.
The pricing process is based on a methodology. Methodology pricing is a set of the most general rules for price formation, related mainly to the macroeconomic features of economic activity systems, as well as with various areas of pricing. In this regard methodological principles can be general both for the economy as a whole, and for a group of related industries and industries.
General methodological rules are determined by the country’s legislative bodies.
The most important elements of the pricing methodology are the principles
- scientific approach;
- target orientation;
- unity of the pricing process.
To implement the pricing process in a market economy certain conditions are required directly at the enterprise. The main ones are:
- economic independence;
- commercial terms of operation;
- competition in the market;
- market equilibrium.