A Detailed Comparison of Cost Based Pricing and Demand Based Pricing

This essay provides a comparative analysis of cost-based pricing and demand-based pricing strategies, both of which are crucial for companies aiming to optimize their product or service pricing. Cost-based pricing involves setting prices based on the cost of production, with methods like target-based profit pricing and break-even cost pricing ensuring profitability and covering fixed costs. Demand-based pricing, on the other hand, adjusts prices according to consumer demand, considering factors like business objectives, market conditions, and customer preferences, and includes techniques such as price skimming and value-based pricing. The essay concludes that both strategies are essential for satisfying customer demand, maintaining customer loyalty, and establishing a strong market presence by offering optimal pricing solutions.

COMPARE AND
CONTRAST COST
BASED PRICING
WITH DEMAND
BASED PRICING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Comparison between the cost based pricing and demand based pricing....................................1
CONCLUSION................................................................................................................................3
REFERENCES ...............................................................................................................................4

INTRODUCTION
This topic tells about the comparison of cost based pricing and demand based pricing of
goods and services and also tell about the methods of both of them which company implement in
the pricing of their product and attract customer into their product or services (Ding and et.al.,
2018). Basically in both cost base pricing its main objective to determine the best price in cost of
production and offering the product to the customer and provide satisfaction to them and in
demand based pricing it changes the price of their product according to the demand of customer.
MAIN BODY
Comparison between the cost based pricing and demand based pricing.
Cost based pricing: Most of the companies sold its goods and services on the basis of
cost based pricing technique they fix its selling price of the product and offering it to the
customer. This technique have construct competitive benefits also and sometimes there are some
disadvantage of it. In this topic we discuss about the comparison between the cost based and
demand based pricing. Basically the meaning of cost based pricing is This is the technique which
helps the firm to put the selling price of the products (I.e., goods and services ). This pricing
technique permit to the firms to construct prices according to the cost which incurred while
manufacturing goods or avail services to the customer. Cost based pricing method includes
several methods of measuring suitable selling price. The main goal of each and every method is
to the cost of manufacturing and providing on the basis of finding the best price and get good
results in high consumer satisfaction. Here are two methods of cost based pricing:
1. Target based profit pricing: This technique is using the companies profit to put in an
appearance at a selling price of the products.
2. Break-even cost based pricing: This technique permit firms to determine the base price
of goods and services that protect the fixed cost of manufacturing and distributing the
products.
Demand based pricing: This pricing technique that consider changes in consumer
demand and modify prices to fit the fluctuations in recognizing value that comes with it (Foti
and Vavalis., 2019). Demand based pricing comes in various parts- all considered by the truth
that they play on consumer demand. These methods depends upon the various factors it includes
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Business objectives of company, it puts in its market, taste and preference of customer and the
quality of goods and services. The particular demand based pricing technique a company also
depends on how and when a firm enters it market. Here are some demand based pricing methods
it includes:
1. Skimming of price:This method is finding and charging increased price of the goods and
services of the customer and ready to purchase and charging low with the duration of
time period.
2. Value demand based pricing: This is the method of pricing the goods and services
depends upon how much customer think it's value.
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CONCLUSION
As it is concluded from the above topic that cost based and demand based pricing basically
companies use this technique to satisfy the demand of customer and maintain the customer into
their product by offering best pricing to them so, they will provide more goods and services and
create its own goodwill into the market.
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REFERENCES
Books and Journals
Ding, Z. and et.al., 2018. A stochastic resource-planning scheme for PHEV charging station
considering energy portfolio optimization and price-responsive demand. 54(6).
pp.5590-5598.
Foti, M. and Vavalis, M., 2019. Blockchain based uniform price double auctions for energy
markets. Applied Energy. 254. p.113604.
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