Finance for Enterprise: Pricing Models Analysis and Evaluation

This report examines various pricing models relevant for Small and Medium Enterprises (SMEs), focusing on cost-plus, performance-based, hourly, and fixed pricing. It begins with an introduction outlining the importance of pricing strategies and the factors influencing them, including competition and c...Read More

Pricing method

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Setting pricing..............................................................................................................................3
Several pricing models on the bases of type of business.............................................................4
How operate and where the product is being positioned.............................................................4
Pricing models.............................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................1

INTRODUCTION
Pricing methods are the means by which price of products and services are set while
considering all the factors including services offered by the organisation. Competition and target
potential customers also impacts on the pricing strategy by the organisation. The life cycle of the
product supplied by the company also has an influence on their pricing model. Pricing methods
can be used in order to ascertaining the value of the offered goods and services at which the
manufacturer is willing to produce in the market (Stennikov, and Penkovskii, 2020). Pricing of
products is a necessary and important decision making by the company which can be used as a
strategy to gain competitive advantage. Marshfield Bakery is one of the best small companies
working in United Kingdom. Marshfield bakery is part of the wholesale industry specialised in
food items.
The company works with less than 100 employees and has become an award winning
company satisfying their customer’s cravings. The main business line of Marshfield is
manufacturing rusks and biscuits, preserved pastry goods and wide variety of cakes. It is a family
founded bakery known for their handmade goods throughout UK and Europe. This transformed
into being a successful and sustainable business and has experienced many fall backs and growth
strategies in their working time period (Putra, 2019). Marshfield is very innovative and well
managed company currently working and growing in UK. Pricing methods helps the
organisation to estimating the worth for the customers. There are several pricing methods used
for the same and are discussed in detail. Known that none of the methods is perfect but they do
some great points which can benefits company’s sales.
MAIN BODY
Setting pricing
Organizations like Marshfield bakery tend to make sure that it is being able to achieve and
efficient economic growth. Through this it tend to guarantee that it is being able to attain an
efficient economic background (Soni and Hasan, 2017). Through which it tend to ensure its
sustainability within the market place therefore the pricing which is being implemented by
companies like Marshfield bakery is being based upon various factors.

Several pricing models on the bases of type of business
The pricing model which is being implemented by the corporation is being dependent
upon the type of product or service which is being provided by the corporation to the customers
and its availability within the marketplace. This is important because pricing makes a direct
impact upon customer’s buying behaviour and company’s economic growth.
How operate and where the product is being positioned
Pricing method is also being used to showcase that corporate tend to showcase the product, to the
customers for developing a brand personality (Louangrath, 2021). In which by setting proper
pricing strategy is being set in consideration with availability and rarity of the product within
market.
Pricing models
1. Cost-plus pricing- It is an type of pricing strategy in which a fixed percentage of
additional value is being added to the fixed unit price. This is an easy to use method
because it minimizes the overall complexity and provides a uniform profit margin.
Advantage- It is an efficient method because in this approach a fixed percentage of profit
margin is being used and because of which it is easy to justify and also by setting a proper
pricing strategy, efficient budget is being achieved for making future changes within the
working process.
Disadvantage- Despite of several advantages there are several associated limitations as
well one of the key disadvantage of this is that fixed profit margin is being established
and due to which limitation has to be faced in terms of achieving situational benefits.
Also several challenges also efficient economic growth is not being accomplished.
Appropriateness- This will be an efficient approach for Marshfield bakery because with this
approach it is being able to ensure that overall work complexity will be reduced (Adebayo,
Manganyela and Adigun, 2020). But also will limit corporation in terms of achieving high return
of investment, due to which appropriateness level of this method is low.
2. Performance based pricing- It is the type of pricing model in which the customer pays
only for the limited amount of service or product which they achieved. This in being
implemented on the bases of closeness of the service to the desired target.
Advantage- This is the latest model and which is often being implemented by several
corporations, through which it tend to assure high quality of service to the customers. By

which it guarantees that it is being able to take appropriate steps, through which
customer’s level of loyalty towards company is being improved.
Disadvantage- Institute provides retail based tangible products due to which level of
customer’s satisfaction level is not being easy to evaluate. Also with that since customers
are being able to choose the type of product which they want to achieve, therefore due to
performance cannot be evaluated.
Appropriateness- In this method pricing is being taken when customers are satisfied with
organizational services, but since Marshfield bakery provide bakery services due to which it will
not be effective for this. This happens because this pricing method is often being used in
advertisement industry rather than product retail industry (Dembek, York and Singh, 2018).
3. Hourly pricing- This is an pricing strategy in which special scheduled based discounts
are often being given to the customers. Since special offers are being given for an limited
time frame, therefore because of which customers are highly motivated to develop a close
contact with the company, so that they can achieve the special benefits.
Advantage- Since special discounts are being provided for a limited time frame, therefore
because of which high level of customer engagement and organizational sales can be seen
in this approach. Also Marshfield bakery will also being able to generate a sense of
excitement, due to which chances of brand switching is being reduced.
Disadvantage- The often main disadvantage of this approach is that a significant
differentiation within regular pricing and special pricing has to established by which
clients can identify the difference. Therefore because of which overall profit margin is
being reduced and also overall work complexity is also being increased.
Appropriateness- This will be an highly effective approach for Marshfield bakery
because through this step it can ensure that a sense of excitement is being generated in
front of the customers (Fowley and et.al, 2017). Through this it can assure their level of
engagement with the corporation is also increased and also with that chance of brand
switching is reduced.
4. Fixed pricing- It is an type of pricing method in which a company desired pricing is
being set and no further changes within the pricing being established to the customers. It
is an effective organizational approach because with this approach customers are being
assured for having best affordable pricing.

Advantage- Pricing is being fixed and due to which time consumption by the customers in
making negotiations is also being reduced. Also because of this approach customers
buying process is being increased because they are able to evaluate the final payable
amount.
Disadvantage- Since a fixed payable amount is being set, therefore because of which it
makes a negative impact in terms of attracting new customers (Agbatogun and Olowe,
2019). Therefore because of which various creative marketing approaches have to be
implemented to increase organizational customer base.
Appropriateness- This approach will not be fruitful for Marshfield bakery because the
company has to ensure that high sales are being accomplished. Therefore because of
which it has to make several customer attracting approaches by which loyalty of the
existing customers can be increased.
CONCLUSION
It can be concluded that using a proper pricing model comes with its own pros and cons.
One of the important points of using pricing model is that it makes easy to focus on both, having
attention on current products while keeping the products constant for the desired period of time
for price comparisons. This is a vital difference along with hourly charge out rates. When the
organisation is up for using pure model for pricing approach then it can be difficult to make the
product be a constant in the market and organisation might consider including homogenous
products. It is important to learn the fact in pricing model that it is necessary to aim on
measuring the evolution of the price. It can be said that price satisfaction is the important key to
attract the customers. Pricing methods provides a flexible range of marketing mix variable and
holds an important part of promoting the sales. It can help the organisation such as Marshfield to
determine their profitability and maintain a healthy competition in the market. Pricing strategies
were initially based on the buyer choice but is now has shifted to behaviour of the potential
customers. Pricing is the only element which helps in generating revenue while other factors lead
to costs.

REFERENCES
Books and journals
Adebayo, I.O., Manganyela, N. and Adigun, M.O., 2020, November. Cost-Benefit Analysis of
Pricing Models in Cloudlets. In 2020 2nd International Multidisciplinary Information
Technology and Engineering Conference (IMITEC) (pp. 1-5). IEEE.
Agbatogun, T.O. and Olowe, A.R., 2019. Sectoral Application of Asset Pricing Models on the
Nigerian Stock Exchange: A Comparative Approach. Acta Universitatis Danubius.
Œconomica. 15(3).
Dembek, K., York, J. and Singh, P.J., 2018. Creating value for multiple stakeholders:
Sustainable business models at the Base of the Pyramid. Journal of Cleaner
production. 196. pp.1600-1612.
Fowley, F. and et.al, 2017, January. Software system migration to cloud-native architectures for
SME-sized software vendors. In International Conference on Current Trends in Theory
and Practice of Informatics (pp. 498-509). Springer, Cham.
Louangrath, P., 2021. Brand Awareness through Pricing Strategy. Available at SSRN 3806253.
Putra, Y.M., 2019. Analysis of Factors Affecting the Interests of SMEs Using Accounting
Applications. Journal of Economics and Business. 2(3).
Soni, A. and Hasan, M., 2017. Pricing schemes in cloud computing: a review. International
Journal of Advanced Computer Research. 7(29). p.60.
Stennikov, V. and Penkovskii, A., 2020. The pricing methods on the monopoly district heating
market. Energy Reports, 6, pp.187-193.
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