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Pricing Method

In any market, there is bound to be a strategy that is used to decide on the prices that the commodities or the services that the potential clients will be in need of. Since the goods or the services availed are always targeted at making a profit at the end o the day, pricing is one of the most fundamental focuses that the entrepreneurs have to keenly look at in order to strike a balance between making profit and retaining clients for the item offered.

In the case scenario below, the pricing methods that should b used in determining the prices of canned vegetables and Aspirin are looked at, the various methods that can be used and how different the pricing methods are as well discussed.

Pricing method for canned vegetables

Taking into account that almost each food outlet has canned vegetables, with several alternatives floated by each outlet, it is important that while the sellers find an appropriate way of pricing their canned vegetables. In a situation like this, where the competition is high and the similarity in products apparent, it does not help to only consider the competition and use the competitor pricing method only.

The best pricing method to employ here is the customer-based pricing approach. This is the approach that takes into account the psychological predisposition of the customer base while setting the prices. It looks at the direction of thought of the customer before settling for a price, this hence enables the customer to always think of their store any time they want to buy canned vegetables.

Customer-based pricing is basically psychological pricing and the following sub-sets therein must be taken into account (Scott Allen, 2012);

Positioning-this deals where the seller wants to be placed in reference to the competition. If the seller wants to be 'low-cost leader' then he must price the canned vegetables lower than the competition, yet if they want to signal high quality, then they must be slightly higher than the competition. The latter does not work well within the canned vegetables bracket, but rather the first approach works better. Canned vegetable prices will always attract or repel buyers since the qualities are all approved by the standardization agencies and the tastes are the same. The lower priced canned vegetable will always get a higher stock turnover.

Popular price points - this is yet another psychological approach to customer pricing method since there are some price points at which clients are generally more susceptible to buying an item than other price points, not because there are great differences in prices but due to a very slight saving ability. The canned vegetables should be priced at such prices like just under $100 or just under $5. For instance, people will be easily drawn to buy cans priced at $0.99, or $9 or even $99 rather than $1 or $100. Being a consumable that is bought regularly, almost on a daily basis or in bulk and stored in the house, this psychological pricing of having the items at popular points can work well for canned vegetable. It can be argued that the dropping of the prices to popular price points could lower the margin, but it is worth noting that the increase in sales it will result into will offset the lowering of the profit margin.

Fair pricing is yet another consumer focused pricing method that can be used in canned vegetable pricing. At times it is worth taking into account the fairness to the customer while setting a price even if you do not have direct competition or regardless of the value of the product. This can be applied in a situation where the stickiest of the canned vegetables has a monopoly of the market, it is essential that they use a pricing that the consumers perceive as fair and not ripping off the customers due to the undue advantages that you have.

Pricing method for Aspirin

Aspirin is among the products in the market that belong to a category with several others with the same efficacy in service rendered and safety. This is due to the thorough standardization that goes into the products being of chemical consistency and taken by people to cure disease. The standardization ensures that the medicinal content of the drugs within a given bracket have the same characteristics hence the pricing of Aspirin is usually dependent on the price of a benchmark drug. In this kind of pricing, the cheapest drug within that bracket usually sets the benchmark for the other brands or other drugs within the same sub-group that have similar therapeutic value (Commonwealth of Australia, 2009).

The kind of pricing method used here is therefore known as reference pricing. Here, there are sub-groups formed of the commodities with relatively same characteristics and the same production cost base, and then the least priced item is used to determine the prices of the other brands within the sub-group. For instance, the inhibitors like the aromatase, protease and corticosteroids are usually bunched into the same sub-group hence priced through the referencing method. This is the same trend that is followed when doing the pricing of Aspirin.