Price

Price origin

Its origin has antecedents in the first human groups, closest to protohistory (first
history) which is considered a phase that is located between prehistory and
ancient history, considering that it is where the first human groups are formed
and that They give shape to large agricultural civilizations, which due to their
geographical conditions had productions with different specialties, so they were
willing to exchange their goods for food, water and other objects that in one way
or another could be exchanged elsewhere. This was known as barter and was
closely linked to the price they put on each exchange object; This is why from
its beginnings the price system is linked to money since its use is made to make
a final decision.

Price Concept

Coming from the Latin “pretium”, it is the monetary value assigned to

something.

The price can be considered as the starting point at which the monetary value
of the product for the buyer is equalized with the value of carrying out the
transaction for the seller. From another perspective, it must be taken into
account that the price is not only money. that is paid to use the product, but also
all the efforts that are invested to obtain the satisfaction of a certain need.

It should be considered as the expression of value that a certain product or

service has, which is manifested through monetary terms, which the buyer must
pay the seller to acquire a certain product or service.

Price is one of the fundamental components of the marketing mix (product,

price , place, promotion), it is considered a critical and determining variable
since it requires a deep and detailed analysis of the market, demand,
competition, brand, sentiment. of belonging, perception, value and other factors
that are a fundamental part of achieving a good position in the market. On the
other hand, it is a controllable variable that differs from the other elements of the
marketing mix since it is the only one that produces income for the company.
For price to be a variable that produces income, it must first be accepted by the
market, which is why it becomes a topic in which the organization or company
knows it in depth. For all these reasons, pricing is probably the most complex of
tasks.

Definition of price, according to several authors:

 For Philip Kotler and Gary Armstrong, authors of the book "Marketing
Fundamentals" , price is "(in the strictest sense) the amount of money
charged for a product or service. In broader terms, price is the sum of
the values that consumers give in exchange for the benefits of having or
using the product or service .

 For Philip Kotler, Gary Armstrong, Dionisio Cámara and Ignacio Cruz,
authors of the book "Marketing" (10th edition) , the price is "the
amount of money a customer must pay to obtain the product."

They provide an example based on the experience of the Ford Company,

which normally calculates and suggests a selling price to its dealers for
each Taurus (one of its automobile models). However, dealers do not
usually charge the full price, but on the contrary, negotiate this price with
each customer through discount offers, exchange of the previous vehicle
and financing. Therefore, "these measures adjust the price to the
competitive situation of the moment and equate it to the value of the car
perceived by the buyer ."

 Patricio Bonta and Mario Farber, authors of the book "199 Questions
About Marketing and Advertising" , define price as "the expression of
a value. The value of a product depends on the image perceived by the
consumer. For example, a light type margarine has a lower cost than a
common margarine; However, consumers perceive any "good for health"
product as having superior value. The consumer considers this mix more
coherent: greater value awarded to the product in question, higher price.
 (Therefore), a cheaper light margarine (than regular margarine) would
not be credible."

 For Laura Fisher and Jorge Espejo, authors of the book "Marketing",
the price of a product is "just an offer to test the pulse of the market. If
customers accept the offer, the price assigned is correct; If they reject it,
it must be changed quickly. On the other hand, if it is sold at a low price,
no profit will be made and, ultimately, the product will fail. But if the price
is too high, sales will be difficult and again the product and the company
will fail."

 The Marketing Dictionary, by Cultural SA , defines price as the

"exchange value of goods or services. In marketing, price is the only
element of the marketing mix that produces revenue, since the rest of
the components produce costs . "

 For Ricardo Romero, author of the book "Marketing" , the price of a

product is the "amount that the consumer must pay the seller to be able
to possess said product . "

 The American Marketing Association (AMA) defines price as "the

formal proportion that indicates the amounts of money, goods or services
necessary to acquire a given quantity of goods or services . "

 For Kerin, Berkowitz, Hartley and Rudelius, from a marketing point of

view, price is “the money or other considerations (including other goods
and services) that are exchanged for the ownership or use of a good or
service.”

 According to Stanton, Etzel and Walker, price is “the amount of money or

other elements of utility needed to purchase a product.”

 For Lamb, Hair and McDaniel, price is “ what is given in exchange to

acquire a good or service.” It can also be the time lost while waiting to
acquire them.”
  According to Dwyer and Tanner, a price is “the money a buyer pays a
seller for a particular product or service.”

Price features

 Price is an element that produces income.

 Calculate the cost of the product or service per unit.
 Calculate the cost of marketing and delivery.
 Calculate the operating cost.
 Launch actions in the short term, such as promotions, offers, discounts,
sales.
 Establish a long-term pricing structure that gives us coherence as a
brand and customer confidence.
 It is a competitive instrument in the market.
 It directly touches the psychology of the consumer, giving the perception
of a luxury product simply by seeing the high cost or making us think that
by being at “X” price, for example $14.99, we are no longer paying $15,
therefore our purchase is reinforced.
 It is a positioning indicator of our product/service and our brand,
establishing ourselves in a specific segment.
 Sometimes it is the directly determining factor of the purchase.
 It can generate a competitive advantage over competitors if it is well
worked and structured.
 It is a powerful competitive instrument in a market where there are few
regulations. However, its use can become a highly dangerous instrument
since extreme price competition can lead to a situation in which no one
wins (only the consumer).
 Only instrument that provides income.

Importance of price
It is considered very important because it is a short-term instrument with which
you can act with greater speed and flexibility than other marketing instruments,
in addition to having immediate effects on sales and profits.

Estimating the price is complex when the company has to do it for the first time,
when a new product is developed or acquired, when its product is introduced
into a new distribution channel or geographic area or when a new offer is made.
The company must decide where to position its product with respect to quality
and price in addition to considering many other factors in setting its pricing
policy such as salaries, income, interest or profits, distinctive characteristics or
brand of the product, which tend to to make prices more rigid.

Therefore, price is a basic regulator in the economic system because it affects

the distribution of these productive factors. In addition, certain psychological
aspects of the price must be taken into account since for consumers the price is
a strong reference in the quality of the product, especially when they make
purchasing decisions without having complete information. Of course,
consumers' perception of product quality can also be influenced by store
reputation, advertising or product promotion in addition to other variables.

The determination of the price has greater importance in periods of inflation and
recession since it is affected when this occurs, and must be adapted in any
way. The price must be appropriate to the value perceived by the consumer, but
the sensitivity to the price and the importance assigned to it by the consumer
are not always constant since it depends on the economic stage in which we
find ourselves, being in times of recession or inflation where The price becomes
a powerful instrument of commercial action.

Price affects the competitive position of the company and its competitive
position in the market. As a result, price has a considerable effect on the
company's revenue and net profit.

In some cases, there may be a price set by the market to which the company
must adapt. This would be the classic assumption of perfect competition, in
which the market imposes its price on buyers and sellers, making any pricing
policy useless other than the acceptance of the price proposed by the market;
The intervention of the state in the economy causes some products to have
their prices fixed or authorized; There are also agreements, generally tacit or
implicit, that exclude the use of prices as competitive variables.

When talking about price we must know that it is very important that it is
appropriate in order to maintain stability in the market. It should be taken into
account that a price decrease is generally welcomed, but it does not always
stimulate demand since it can be interpreted as the beginning of new decreases
or a decrease in quality.

Price-quality strategies according to Philip Kotler

Kotler suggests in his book “Marketing Management” nine possible price-quality

strategies, which are crystallized in the following table.

Product Price
quality High Half Low
 high 1 2 3

Scarcity High value strategy Maximum

strategy value
strategy

Half 4 5 6

Overpricing Medium strategy Good

strategy value
strategy
Low 7 8 9

Breakout False economy strategy cheap

strategy strategy

 Strategies 1, 5, and 9 can coexist in the same market, targeting market

segments differentiated by interest in price, quality, or a quality-price
balance.

 Strategies 2, 3 and 6 are competitive attacks against the companies

located on the diagonal, by offering a significantly lower price under
identical quality conditions.

 Strategies 4, 7 and 8 consist of overvaluing the product with respect to its

quality. These strategies are discovered in the medium term by
customers, who will gradually abandon purchasing the brand, and that is
why they are usually rejected by commercial managers.

Price decisions must be subordinated, first of all, to the objectives of the

company's commercial policy, and lastly to the general objectives of the
company. When determining the pricing policy, the objective of profit
maximization is fundamentally influenced, but factors such as prestige, social
responsibility, image of the company and the product, price stability,
achievement of an objective also act. given return on investment, achieve a
certain market share.

Types of prices

1. Base Price: The base price can be used for initial optimizations. It is also
known as initial price. It differs from the current price only in the way it is
completed in the application. The base price is loaded into the app from
the model export or directly imported into the app. Controls the base CPI
calculation on the Competitor Price Index (CPI) page.
2. New Price: The price of an optimization, rules-based pricing, price
update, or user alteration action in a scenario.
3. Previous Price: The starting price at the time of the initial pricing action
(an optimization or rules-based pricing). The previous price will not
change when the scenario has price updates. You may want to hide the
Previous Price field after the price update has completed, although it is
still important for initial pricing actions. The Previous Price is the default
"previous" comparison number displayed in the financial data in the
Scenario Summary and Results reports.
4. List price : considered the official price of a product, which generally
appears in what is listed, known as before discounts or other types of
deductions.
5. Expected price : price of a certain product according to the conscious or
unconscious evaluation of the buyer or consumer.
6. High price : market strategy that consists of adding a “new product” of
higher price and more prestige to a line of existing products, with the aim
of causing an increase in the sales rate of previous products, it is a
strategy that allows increase line extension by increasing plant
production capacity to reach other segments that can be very profitable.
7. Low price : it is a strategy very similar to the high price, except that a
“new product of lower value” is added to reach low socioeconomic levels.
 In other words, higher-priced products are expected to help sell lower-
priced ones.
8. Symbolic price : price that, instead of being governed by the law of
demand and supply, is set with the purpose of transmitting a specific idea
about the product. It is sometimes used for promotions and is known as
plus 1.
9. Penetration price: pricing strategy that consists of setting a low initial
price in order to facilitate rapid penetration of the product in the market.
10. Stabilization price: practice that is done with the purpose of stabilizing
the prices of an industry and that is usually the initiative of the company
that is the price leader. It allows other companies in the industry to
establish their prices in relation to the standard set by the leader.
11. Unit price: method of establishing a price in relation to some universally
recognized measure, so that it helps the customer at the time of
purchase.
12. Maximum or reserve price: it is considered the upper limit to which a
price of a product can reach, and is set by the administrative authorities
as they decide to intervene in an industrial sector by establishing a
political or legal price for the product, commonly used in auctions. .
13. Minimum price: lower limit to which the price of a product can reach and
it cannot be sold below what is established.
14. Purchase price: it is the price that a buyer is willing to pay to acquire a
certain product or service.
15. Cost price : it is the price that has to be paid to be able to carry out an
action, in which the objective is to obtain profits.
16. Selling price: it is the minimum price that the seller is willing to accept to
sell their product or service.
17. Spot or cash price: it is the one that is agreed for immediate
transactions.
18. Wholesale price: It is lower than the retail price since it is sold in
relatively large quantities.
19. Retail price (retail): price at which products or services are sold to final
consumers, normally in small and medium-sized stores.
 20. Gross price: it is the real value of a product or service before applying
reductions or discounts.
21. Skimming price: high price applied at the launch stage, innovations,
demand sensitive to promotions, highly segmented market.
22. Market price: it is the price at which a good or service can be purchased
in a specific market, without artificial alterations, as a result of supply and
demand.
23. Liquidation price: it is the reduced price to liquidate stocks, launches,
closure, change of activity.
24. Reference price: it is the standard price with which consumers make
comparisons.
25. Transfer price : these are the prices set in international transactions
between fiscally linked persons or entities.
26. Retail Price (RPP): is the total amount expressed in a currency that the
buyer must pay to the seller, including the taxes levied on the product.
27. Ethical price: refers to the monetary value that is considered
convenient, proportionate and correct for a certain product or service.
28. Fixed price: it is a price that does not change or cannot be modified.
29. Current price: it is a fixed price that does not vary in the short and
medium term. During the period of validity of the current price, the
attributes of the product (quality, quantity) may change but not the price.

Price functions

The needs and desires indicated by each individual assume a system of prices
or interrelationships, which is why they help contribute to adjusting each value,
whether in supply or demand.

There are two extremely important functions in prices and these are:

 React goods and services and factors

What is sought is to achieve a balance in the market, therefore we have to

agree on prices so that resources are guaranteed efficiently. According to the
fact that there must be a balance in the market, we can base ourselves on two
scenarios.

- If the demand for a good increases, there will not be enough supply of
said good to cover all the demand and this will cause the price to rise.
When the price rises, demand will be reduced and this It will cause a
balance to exist in the market.

- If demand decreases, there will be no supply capable of meeting that

demand and the price will fall. So the supply will be reduced and there
will once again be a balance in the market.

The quantity of products that buyers will want will depend on the prices that will
allow them to buy, and on the other hand will allow entrepreneurs to determine
at what price to sell each product.

- When prices rise or increase it is called “inflation”, which causes

companies to increase production and generate a greater amount of
their own profits.

- In the event that prices decrease or decrease, a “deflation” occurs,

which will have the effect of reducing the production of some product.

 Serve as an incentive for entrepreneurs and factor owners

Production costs can be paid thanks to the money that companies collect
through the sales of their products at a certain price, which leads to spending on
labor, basic services, raw materials, etc.

Pricing system

It is a tool that is assigned and establishes a price for a good or service. To

maintain the thread of production, a global economy is needed in which capital
is managed in a market that defines the value of each product.
The function of this price system is to maintain a constant balance between an
increasingly changing market and certain currency indicators.

The forms of payment that the person has available, whether cash, credit cards,
debit cards, etc., to be able to cancel a purchase or provision of services.

The pricing system of a company has different systems to support the market,
in this way all participants in the sales area are kept informed and the
availability and value of the products. Price systems allow the company that
produces to establish its desired price, adhering to laws that aim to protect the
final consumer. There are two types: fixed prices and free prices.

Son precios que

estan dispuestos
por un gobierno.
Precio
Fijo
Sistemas politicos
Sistemas socialistas o
de comunistas.
Precios
Están
Precio determinados por
Libre una oferta y una
demanda.

Pricing in Ecuador

In Ecuador, article 335 of the Constitution determines that the State will
regulate, control and intervene when necessary in economic exchanges and
transactions, and will sanction exploitation, usury, hoarding, simulation, and
speculative intermediation of goods and services. The State will define a pricing
policy aimed at protecting national production, establishing sanction
mechanisms to avoid any practice of private monopoly and oligopoly, abuse of
dominant position in the market and other practices of unfair competition.
Numeral 5 of article 4 of the Organic Law of Consumer Protection stipulates that
it is a right of consumers to receive transparent, equitable and non-
discriminatory or abusive treatment from suppliers of goods and services,
especially with regard to the conditions optimal quality, quantity, price, weight
and measurement.

Article 51 of the Organic Law on Consumer Protection prohibits speculation as

well as any other unfair practice that tends or causes indiscriminate increases in
the prices of goods and services.

Article 32 of the Organic Law of Regulation and Control of Market Power

prescribes that it is up to the Executive function, on an exceptional and
temporary basis, by executive decree, to define price policies for the benefit of
popular consumption, as well as production. of national production and its
sustainability.

In the agri-food sector, mechanisms may be established to determine reference

prices.

(Secretaria Nacional de Comunicacion, 2015)

In order to determine reference prices, the following methodology will be used:

 Historical price information will be collected at the wholesale level, in

each of the markets of said category at the national level, corresponding
to the immediately preceding 3 months in order to have a minimum of 30
data to establish the reference price.
  The reference price will result from the application of the median of the
historical prices, previously collected for each of the products that have
suffered speculation.
(Secretaria Nacional de Comunicacion, 2015)

Distribution channel

For all members that are part of the distribution channel there are different
prices and what protects all members of the chain is the protection or
negotiation margin.

FABRICANTE DISTRIBUIDOR MAYORISTA DETALLISTA

COSTO PVD PVM PVP

MARGIN OF PROTECTION

Analysis

The fixing policies that we found aim to promote the distribution of goods and
services in an equitable manner for all clients within the different commercial
levels, preventing manufacturers from charging excessive prices to their
distributors and that they do so in the same way to retailers affecting the
economy of final consumers more strongly.

The State may intervene when price fixing generates exorbitant enrichments
based on unethical price fixing without justifying said increase in quality or
quantity of products or services. In conclusion, this protection is based on not
modifying prices for the benefit of a few.
In order to avoid this, a contract should be signed where prices are established
for each level of the channel, generating benefits for everyone without harming
the final consumer.

The manufacturing cost of a certain good must also be analyzed, since the
higher the cost of said good, the better a short or direct distribution channel is to
avoid a price that is too high for the consumer, since by going through many
intermediaries the price at each level will increase; On the other hand, if the
manufacturing cost of a good is low, there may be a distribution with the
participation of several intermediaries and even then the price for the final
consumer will not be greatly affected and will continue to be accessible.

To justify a higher price than their competition, manufacturers or producers

must improve the quality of their products or services. In addition to this, they
must communicate this increase in quality to their customers, generating
differentiation between their goods and similar goods and substitutes. that the
competition offers, for this they can carry out different strategies so that
consumers identify the added value that is being offered to them such as status,
prestige, security, among others, and not only think that they are acquiring a
good or service with a high price.

New Product Pricing Strategies

We have two strategies in setting prices for new products:

- Pricing to capture the highest level of the market.

- Setting prices to penetrate the market.

For pricing to capture the highest level of the market, it is said to be a strategy
in which a high price is set for a new product, with the aim of obtaining a
maximization of income, selling less but its profit margin. will be greater.

The image and quality of the product must support this high price, there must be
a sufficient number of buyers willing to purchase the product for that price.
On the other hand, when setting prices to penetrate the market, a low price
must be set for a new product, considering attracting a large number of buyers.

The market must be price sensitive; low prices help prevent the entry of new
competitors.

Product Mix Pricing Strategies

FIJACIÓN DE PRECIOS DE LÍNEA DE PRODUCTOS

Toma ciertas diferencias de costo entre los prodcutos de una línea.

FIJACIÓN DE PRECIOS DE PRODUCTO OPCIONAL

Toma en cuenta varios productos opcionales junto con el producto final

FIJACIÓN DE PRECIOS DE PRODUCTO CAUTIVO

Se debe establecer el precio para bienes que deben utilizarse junto con el producto principal

FIJACIÓN DE PRECIOS DE SUBPRODUCTOS

Se refiere a productos con poco o ningun valor que genere como resultado del producto final

FIJACIÓN DE PRECIOS DE PRODUCTOS COLECTIVOS

Mezclar varios productos y ofrecer en conjunto por un precio reducido

Price adjustment strategies

FIJACIÓN DE PRECIOS DE DESCUENTO Y BONIFICACIÓN

Se reducen los precios para recompensar las respuestas de los clientes, incluyen descuentos en pagos en
efectivo.

FIJACIÓN DE PRECIOS SEGMENTADA

Se usa cuando la empresa vende un producto a dos o mas precios, se puede decir como nutri leche vende el
mismo producto pero a menor precio.

FIJACIÓN DE PRECIOS PSICOLÓGICA

Son los precios que los compradores tienen en mente y comparan cuando examinan un producto.

FIJACIÓN DE PRECIOS PROMOCIONAL

Se fija temporalmente precios de productos, existen veces que hasta por debajo de su costo, con la finalidad de
incrementar las ventas.

FIJACIÓN DE PRECIOS GEOGRÁFICA

Se usa para clientes en diferentes partes del pais o del mundo.

FIJACIÓN DE PRECIOS DINÁMICA

Se ajustan de manera continua para satisfacer las necesidades de cada cliente.

FIJACIÓN DE PRECIOS INTERNACIONAL

En un país se establecen de acuerdo a condiciones económicas, leyes y regulaciones.

Ethics in pricing policy

What is Ethics and Morals?

In philosophical context, ethics and morality have different meanings. Ethics is

related to the well-founded study of the moral values that guide human behavior
in society, while morality is the customs, norms, taboos and conventions
established by each society.
These terms have different etymological origins. The word "ethics" comes from
the Greek "ethos" which means "way of being" or "character." The word "moral"
comes from the Latin word "morales," which means "relating to customs."

Ethics is a set of knowledge derived from the investigation of human behavior

by trying to explain moral rules in a rational, founded, scientific and theoretical
manner. It is a reflection on morality.

Morality is the set of rules that apply in everyday life and are continually used by
all citizens. These norms guide each individual, guiding their actions and
judgments about what is moral or immoral, right or wrong, good or bad.

In a practical sense, the purpose of ethics and morality is very similar. Both are
responsible for building the foundation that will guide man's behavior,
determining his character, his altruism and his virtues, and for teaching the best
way to act and behave in society.

Ethics and pricing

Ethics is a reflection on the moral fact that seeks the reasons that justify us
using one moral system or another and even advising it. Therefore, we could
define ethics as that part of philosophy that must account for the moral
phenomenon in general.

Price setting, also known as pricing, is the instrument with the greatest power to
influence the company's results and consumer decisions.

The use of money has been the dominant norm for centuries when carrying out
a commercial exchange of goods and services. However, pricing is more than
just a routine activity. Sales performance and, consequently, the success of the
organization involved largely depends on this activity. Even along with
distribution, promotion and product definition, pricing is considered one of the
primary elements of the famous marketing mix stated by Neil H. Borden in 1964
and which is still considered current.

Ethics in establishing pricing policies

When making pricing decisions, the successful strategist must consider not only
what is profitable, but what will be perceived as ethical and legal.

Legal framework for pricing

Statutes, regulations and guidelines, as well as countless court rulings, have

defined what constitutes anti-competitive pricing behavior, as well as the rules
that governments and private actors apply to pursue those who They have
similar behavior.

Direct Deal Programs

One way to control the prices charged to end customers is for the supplier to
sell directly to these customers, or to use sales agents.

Format of a resale price

Instead of setting the resale price through an agreement, a pricing policy, or a

direct sale, some suppliers encourage the setting of desirable resale prices by
offering financial and other incentives, such as advertising money, to promote
certain prices.

Price discrimination and promotion

Price discrimination

In order to prove that illegal price discrimination has occurred, the following five
conditions must be met:
1) Discrimination. This condition is met simply by charging different prices to
customers.

2) Sales to two or more buyers. Different prices must be charged for sales
made in the same period of time by two or more buyers: a rule that authorizes
price fluctuations.

3) Goods. It applies to the sale of goods – “merchandise” in the statute – so

services are not included.

4) Equal quality and quality. The goods in question must be physically, or

essentially, the same. Brand preferences are irrelevant, but functional variations
can differentiate products.

5) Reasonable probability of harm to competition. The law usually focuses

on damages in one of the following two areas. The first, called “primary line,”
allows the supplier to sue a competitor for practicing discriminatory pricing. And
the second, called “secondary line”, by which the end customer or seller
disadvantaged by a supplier can sue the supplier for price discrimination.

Benefits of Ethical Behavior in establishing pricing policies:

The fact that business owners plan, implement and control the different
marketing activities and processes in an ethical manner generates benefits in
the short and long term. Some of these benefits are the following:

Confidence Generation

Every business is built on relationships with suppliers, customers, employees

and other groups. The strength of those relationships is largely a function of the
amount of trust the parties have in each other [1]. In that sense, ethical conduct
is an essential factor for generating trust because it has the ability to grant
credibility to those who practice it.
Attracting Good Customers, Suppliers, Employees, Distributors and
Others
The fact of not doing harm, of not deceiving or lying to others, of complying with
what is offered, of respecting others and their environment, of transmitting an
image of professionalism, of respecting current laws and regulations, etc., It is
like a magnet that attracts people who usually behave in the same way because
they identify with those actions. Let's remember the "golden rule": Treat others
as you want to be treated.

Ethical pricing is used when the demand for the product has price elasticity and
the seller is a professional who has a responsibility not to overcharge his
customers. In certain situations, professionals or other institutions may apply
different prices depending on the social purpose of the good sold or the se or a
client's ability to pay.

Among other things, companies must clearly identify which consumers they are
targeting and understand how much those consumers are willing to pay for a
given product or service. Companies must also recognize the importance of
pricing as a tool to differentiate a product or service from that of competitors,
since price sends signals about its quality and exclusivity. In addition, it is
important to take into account the type of distributors who will introduce the
product to the markets; If they do not make enough profits, sales will suffer.
Furthermore, companies must realize that by nature the pricing strategy should
be long-term, in the sense that it should pave the way for the entry of other
products into the market.

Ethics in pricing largely determines consumption and/or customer acceptance.

When prices are applied, it must be done with utmost ethical responsibility.

All decisions made regarding the elements of the marketing mix are critically
important, as is the decision about what price to ask for the product or service.
The task of setting prices is repetitive because it takes place in a dynamic
environment: changes in cost structures affect profitability, new competitors and
new products alter the competitive balance, changes in consumer tastes and
disposable income modify established consumption models. This being the
case, an organization must not only continually evaluate its prices, but also the
processes and methods it uses to arrive at those prices.

When making pricing decisions, marketers have to take a range of factors into
account. Internal factors include the company's marketing objectives, marketing
mix strategy, and cost structures. External factors include the state of market
development, supply and demand conditions, the nature and level of
competition and environmental considerations such as legal, political and
economic events and social norms and trends. Pricing objectives can be
classified into six main groups: profitability, volume, competition, prestige,
strategic and relationship.

Definition of pricing

Pricing conditions

There are a series of conditioning factors that act as restrictions or limitations.

External factors

Legal framework: through the legal framework , the limits between which
prices must move can be regulated, however, there is freedom of prices for
some products in which it is necessary to have administrative authorization or
the intervention of other people to modify prices.

Market and competition: within these factors there is freedom of prices ,

competition conditions the setting of prices according to the competitive
situation in which the company finds itself, which may have greater or lesser
capacity to modify prices.

Changes in prices will have very different consequences depending on the

reaction of the competition, since it can generate a quick or slow reaction in the
competition, which will make the change effective or not.

Multiple interested parties (Distributors): the company faces its pricing

decisions to the reactions that may arise from different audiences, in addition to
the customers themselves, price changes can affect the expectations of the
following audiences:
  Competitors: you must be alert to the reaction of your direct and indirect
competition to a price change.
 Intermediaries: the company's actions on the price may be altered by
distributors.
 Shareholders and workers: both will expect higher income or
remuneration if prices rise.
 Suppliers: If they raise the selling price, they may demand a higher price
for their supplies.
 Creditors: there may be a price reduction if they estimate that there will
be a decrease in income and, consequently, a decrease in the
company's solvency.
 Departmental directors of the company: the commercial director will
prefer low prices to increase sales, while the financial director may
consider that income will be higher with high prices or that the risks of
default will decrease as the number of clients is reduced.
 Consumer and user organizations: these institutions will want to
intervene in the pricing process or will denounce any price increase that
they consider excessive.
 Society in general: price increases are always unexpected, but
decreases can discredit or damage the image of a product or company.

Internal factors

Business objectives
Companies constitute a decisive factor in the pricing process and are the basis
for the formulation of marketing strategies. We can distinguish three types of
objectives to guide the pricing strategies of companies.

 Profit-oriented objectives: Companies set their prices trying to

maximize profits, this is ineffective in practice since it requires that the
company know what the functions of cost and demand are, and that the
environmental conditions remain the same. untouchables which is not
usual, it is more feasible to set the objective of achieving a certain
 profitability on the invested capital or on the permanent capital of the
company, in case the price is set for the product it must allow achieving a
certain profitability.
 Sales-oriented objectives: product prices can also be set with the
intention of achieving certain sales levels, however, it must be kept in
mind that obtaining an increase in sales is not necessarily a benefit,
another possibility is to set prices the products according to the
participation that the company wishes to have in the market.
 Image-oriented objectives: the company can set prices for its products
trying to get consumers to form a certain image of the products and their
brands in their minds, in some cases they also set high prices with the
intention of building or reinforcing the image. and quality of their
products, they use low prices so that the image of the product appears
economical.

Cross elasticities

Any modification that exists in the price of a product or service can alter the
demand for another or others in the range of products offered, better known as
cross elasticity of demand, which occurs when there is a relationship of
complementarity or substitution between the products.

Commercial instruments interaction

The price is one of the most important instruments since it integrates the
commercial strategy, helping to create and maintain the positioning of the
products in the market.
Setting the sales price must take into account the following marketing policies,
product, distribution and communication so that there are no contradictions
between them, and they contribute to achieving the proposed general
objectives.

Example
  Prestige: a product with prestige will require less sales effort on the part
of the channel, which increases the manufacturer's choice of distributors
and makes it easier to set the sales price.
 Novelty: the newer the product, the greater the need to adapt the
consumer to its use, thus requiring specialized channels with which we
can establish a higher profit margin.

Price also determines distribution systems to a certain extent.

 If the price is high, the profit margins per unit sold will be higher, and will
allow direct or exclusive sales.
 For low-price products, direct or exclusive distribution is not justified,
forcing distribution through intermediaries shared with other competitors.

An improvement in the quality of the product can modify the elasticity of

demand; if the quality is perceived and appreciated by the consumer, they will
be willing to pay a higher price for the product.

Advertising can reduce the sensitivity of demand with respect to prices, just as
there are products that are sold without a brand and are presented at the lowest
price offered due to savings in advertising costs.

Costs and product experience curve

If the total income obtained is one of the causes of the benefit, the costs are
what lead to its complete determination, however, not all costs are of the same
nature.
 Fixed costs: are those that do not vary with the volume of production
and sales, regardless of the quantities manufactured and marketed of a
product, the company must pay salaries, rents, interests, services,
everything that constitutes fixed costs.
  Variable costs: are those that vary directly with the volume of products
sold, each unit of product obtained is usually made up of raw materials
and other components such as: transportation, marketing.

The sum of these two types of costs, both fixed and variable, are the total costs,
and the total cost is distributed among all the units of products obtained, the unit
cost will be obtained, which is the cost for the company that manufactures it.
and markets it.

If fixed costs account for the majority of total costs, the greater the volume of
products manufactured and sold, the greater the profit for the company, and if
variable costs have a very high weight in the company's total costs company,
the profit will be greatly affected by the price of the product, since a small
increase can allow it to increase its profits and a slight decrease can be
unfavorable to them.

For example: in some industries such as the automobile industry, as the

production volume increases, the unit cost of manufacturing products is lower. It
is known as economies of scale, the company will be interested in
manufacturing the product in large quantities to operate with low unit costs,
seeking to benefit from this situation with which it will be forced to To benefit
from this situation it will be forced to have a important market share, which you
can achieve by marketing your product at a relatively low sales price.

As a company gains experience producing and selling a product, unit

production costs tend to reduce. If the cost of production decreases, the prices
offered may be lower and the company acquires a competitive advantage.

Product life cycle:

The discovery of the product life cycle model is due to Theodore Levitt, who first
used the concept in a 1965 article published in the Harvard Business Review.
According to Levitt, products, like living beings, are born, grow, They develop
and die, but the business world makes these concepts forgotten because today
the current life cycle has a vital stage for the satisfactory development of the
product. In the 21st century we must talk about five stages:

 Introduction

In this instance, once the product has been launched on the market, the
company, through the marketing area, takes care of all the necessary activities
to ensure the original coverage and penetration plan foreseen in the project
objectives .

The efforts of this stage focus on : coverage of distribution channels,

promotion, merchandising, training and supervision of the sales force, physical
distribution.

Efforts with clients: Beginning of advertising communication and

fundamentally its positioning.

 Growth

Positioning in the defined segment, increasing basic differentiation, degree of

loyalty or repeat purchases with sustained progress, good coverage in
distribution channels, growing penetration in the market, but with ample
opportunities for progress between 10% and 95% of the maximum objective
established for when the product reaches maturity.

 Maturity

Optimal level of market coverage and penetration, with few possibilities for
growth, end of the sales growth trend maximum levels of contribution and final
profitability , firm but stabilized maximum action of the competition to displace
positions achieved leadership and dominance in the operated segments , or in
the total market, high rates of customer loyalty , wide and almost total extension
of product lines or varieties, brands and uses with high recognition and deep
positioning.

 Slope

Last and undesirable stage or phase of the life cycle, in which the product is
forgotten or becomes outdated, dangerously lowering its sales. This decline
can, however, be intentional to liquidate obsolete stocks that cause problems.

The product in its life cycle can determine the pricing policy; products that are in
the introduction and growth stages tend to be purchased by the most innovative
consumers in the market, who are usually less sensitive to this variable and this
is where These circumstances should be taken advantage of to place a high
price on the product, only when no new competitors enter the market. As the
product has been on the market for a while and enters the maturity and
saturation phases, competition becomes tougher and Demand becomes more
sensitive to price, which often forces the price of the product to be reduced.

Due to this, the elasticity of demand undergoes a variation throughout the

product cycle, and this and the cross elasticities are what determine the
evolution of the price.

An example of this is: the patent for a mobile phone, where less current models
are given away to get customers.

Pricing methods.

Companies have a certain margin of maneuver to set the price of the product
delimited between an upper and lower limit, when the company markets a
product whose sales price does not allow it to recover the cost of
manufacturing, distribution and sale. The unit cost of the product determines a
minimum level for the price, the consumers themselves delimit the upper limit of
this interval (since it would not make sense for the company itself to set a price
since it can be excessively high and no one buys), in this way Customer
assessment, competitors' prices and costs are elements that set the margin of
maneuver with which the price must be established.
When setting a price for a product, three methods can be used, depending on:
 Costs
 Competence
 Market or demand

Cost-based methods

They are classified into two modalities:

1) Cost plus margin method: which consists of adding a profit margin to
the total unit cost of the product.

Fixed costs

Total unit cost = Units produced + Unit variable cost

Sales price = Total unit cost + Profit margin on cost

The margin can also be calculated on the price instead of on the cost of the
product.
 Sales price (PV) = Total unit cost (CTU) + Margin on sales price
(M*PV)

PV= CTU + M * PV

Selling price (PV) = Total unit cost (CTU)

1 – Margin on sales price (M)

The cost plus method simplifies price determination, facilitates the calculation of
any reduction or adjustment in price and leads to similar prices among
competitors when applied, and allows the buyer to trust the seller, so that has
established an objective criterion to set the price and this will be the same
regardless of the consumer's desire to purchase the product.

2) Target price or profitability threshold method: this method aims to set

the price that allows obtaining a profit or sales volume, for its
determination the analysis of the “dead point” or the “profitability
threshold” can be used, which It consists of calculating the quantity of
product that has to be sold at a certain price to cover all the fixed and
variable costs incurred in the manufacture and sale of the product.

The point at which income is equal to total costs determines the number of units
sold that makes the profit obtained zero. From this point on, profits begin to be
generated below losses are incurred.

This point is the so-called “dead point” or “profitability threshold”.

 Revenue = Total Costs: P * Q = CF + CVU * Q

Being: P = Price CF = Total fixed costs

Q = Sales volume (in units) CVU = Unit variable cost

Total fixed costs (CF)

Sales volume (Q) = Price (P) – Unit variable cost (CVU)

Breakeven analysis can also be used to determine the price that should be set
to achieve the expected sales and profitability objectives.

Revenue = Total Costs + Profits: P * Q = CF + CVU * Q + B

Being: P = Price CF = Total fixed costs

Q = Sales volume (in units) CVU = Unit variable cost

B = Benefits

Total fixed costs (CF) + Profits

(B)
Price (P) + Unit variable cost
= Sales volume (Q)
(CVU)
Cost-based pricing procedures have the drawback of not considering the
response of demand or competition to price variations.

However, they allow an analysis of price sensitivity to changes in sales and

profit forecasts.

Competency-based methods.

This method has the reference to set prices, it is the participation of competition
or market behavior. However, the costs set the minimum price so that they can
be sold.
Companies will set a price similar to that established in the sector, unless they
have some advantage or disadvantage in quality, availability, distribution or
complementary services, in which case they will set prices above or below,
respectively, one of the competitive situations.

Example:

A particular competitive situation is constituted by the tender or competition that

occurs in construction and public contracting, in which the company that offers
the lowest price wins the competition as long as the given conditions are met,
the lower the price offered. , the greater the chances of winning the contest, but
the lower the profit.

To decide which is the best offer to make in these situations, the expected value
can be determined, which is the result of multiplying the economic consequence
of an event by its probability of occurrence.

Methods based on market or demand.

The analysis of demand studies the relationship between the prices of products
and the quantities demanded by consumers, for this they use the concept of
elasticity, which measures the relationship between the relative variations in the
quantities demanded of product and the relative variations in its prices.
 Relative variations in the quantities
demanded of the product
Elasticity of demand =
Relative variations in price

When consumers are very sensitive to price, a minimal increase in the price of
the product can cause very significant falls in sales and a small decrease can
increase them. In these cases, the elasticity of demand will give values greater
than unity and we will say that demand is elastic.

On the other hand, when consumers are not very sensitive to price, we will say
that demand is rigid or inelastic, since values less than unity are obtained for
elasticity. The demand curve shows the probable purchase volume at different
price values, and comes given by the reactions of multiple consumers with
different price sensitivities Nagle has identified nine factors that influence
consumers' sensitivity to the price of a product:

Sensitivity table

Variables that affect price sensitivity

1. Product The more differentiated the product is presented in

differentiation. the market, the less sensitive consumers will be.
(yogurt)

2. Lack of knowledge of If consumers do not perceive the existence of

substitute products. substitute products, they are less sensitive to price.
(international flights)

3. Difficulties in Buyers are less price sensitive when they are unable
evaluating quantities. to evaluate the quality of substitute products.
 (Footwear)

4. Proportion of If purchasing the product only involves a small

expenditure to income. expense for the consumer, he or she will be less
sensitive to price. (Wine bottle)

5. Final benefit. Consumers are more insensitive to price the lower

the benefit they expect to obtain. (You are more
sensitive to bread than to cakes)

6. Cost sharing. Buyers are less sensitive to price when part of the
cost is shared with others. (Community fees)

7. Complementary If the product is used in conjunction with others

product. already purchased, the price sensitivity is lower.
(Vehicle spare parts)

The application of this method to calculate the price of the product requires prior
knowledge of the elasticity of demand, setting the most appropriate price to the
sensitivity to prices detected. In market-based methods, prices can be set
considering psychology. of the consumer or taking into account the elasticity of
demand depending on the different market segments.

Price features

 It is a short-term instrument and is the most flexible element, since it can

be modified quickly and its effects are immediate on sales and profits.
 It is a powerful competitive instrument, especially in markets with few
regulations.
 It influences both supply and demand, in fact, in economic terms, price is
a variable defined by both factors.
 It is the united marketing instrument that provides income, the
development of product, communication and distribution actions entails a
cost for the company
 It has important psychological repercussions on the consumer or user
and is a key factor in the consumer's idea of the product and in their
purchasing decision.
  In many purchasing decisions, it is the only information available.

Pricing policies

Skimming price policy: Try to sell at a high price to the highest part of the
market, that is, to the top of the demand curve, before targeting the most price-
sensitive consumers, this policy is more attractive if demand is very inelastic, at
least at higher price levels.

Prestige pricing policy: Price is often an important element in communicating

the product image and in fact some managers strive to present an image of
quality by using the product label. Starting from the principle of “quality first” we
must try to ensure that our prices are in accordance with the market, therefore,
there are certain products such as beers, automobiles, cosmetics and liquors
that receive a prestigious image through the policy to set its price.

Geographic pricing policies: When determining a price a seller must consider

the factor of freight costs caused by shipping the merchandise to the customer.
This consideration becomes important as freight becomes a substantial part of
variable costs. Pricing policies should be established according to whether the
buyer pays all freight, the seller absorbs the entire cost, or both parties share
the expense. The decision may be important in relation to:

 The geographical limits of the company's market.

 The location of your production facilities.
 The sources of your raw materials.
 Your competitive strength.

Price and customer value policies

 Pricing policies must be analyzed carefully and cautiously by the

marketing manager, since they can lead to serious problems because
 they all combine to impact customer value and whether or not there is a
competitive advantage.
 Customer value is based on the benefits that the consumer perceives in
a company's marketing mix and all costs, however, price is usually the
main factor in the cost part of the value equation.

Value-oriented pricing

This means setting a fair price level for the marketing mix that truly offers the
target market superior value, such a type of price not necessarily cheap, if by
cheap we mean extreme austerity or poor quality. Nor does it mean great
prestige if it is not accompanied by the adequate quality of goods and services,
rather it focuses on the consumer's needs and how the marketing mix satisfies
them.

MIX Price

The marketing mix is one of the classic elements of marketing, it is a term

created by McCarthy in 1960, which is used to encompass its four basic
components: product, price, distribution and communication , these four
variables are also known as: the 4Ps of marketing (the company's marketing
mix) can be considered as the traditional variables with which they have an
organization to achieve their commercial objectives, for which it is necessary
that the four marketing variables are coherently combined and that they work
together to that complement each other.
Marketing mix variables: the 4ps

Product
The product is the variable par excellence of the marketing mix since it
encompasses both the goods and services that a company sells, it is the means
by which the needs of consumers are satisfied, due to this, the product must
focus on solving needs, within the product we find important aspects to work on
such as image, brand, packaging or after-sales services, decisions must also be
made about the product portfolio, its product differentiation strategy, the life
cycle or even launching new products.

Price
It is the marketing mix variable through which a company's income is entered.
Before setting the prices of our products, certain aspects such as the
consumer, market, costs, competition, etc. must be studied.
Jointly and with total consistency, the price variable helps to position the
product, which is why having a quality product in the same way it is convenient
to set a high price will help us reinforce its image.

Distribution

It consists of a set of tasks or activities necessary to move the finished product

to the different points of sale, which plays a key role in the commercial
management of any company. It is necessary to work continuously to put the
product in the hands of the consumer in the right time and place.

Communication
Thanks to communication, companies can make known how their products can
satisfy the needs of their target audience. We can find different communication
tools: personal selling, sales promotion, advertising, direct marketing and public
relations. The way in which these tools are combined will depend on our
product, the market, the target audience, our competition and the strategy we
have defined.

Marketing mix approach

Without a doubt throughout the short history of marketing, the concept of

marketing mix has been one of the most important aspects in the strategic and
tactical field. However, it is necessary to provide the 4Ps with a current
approach, an approach based on the protagonist, the customer, to know the
cost of customer satisfaction and calculate the return via price, in distribution,
the customer's purchasing comfort. It is a key point, which is why it is necessary
to choose the distribution channels based on your preferences. As for
communication, today's customer prefers it to be in a social and digital
environment such as the current one, customers are part of a two-way street,
where they are an active part of a conversation with brands.

Price targets

Price objectives are expectations that explicitly specify the purposes that the
price is intended to achieve, which are:

 Survival
As long as prices cover variable costs and part of fixed costs, the
company can remain in business. Therefore, the objective is to cover
these costs in such a way that losses are not reproduced. This is an
objective that only applies in the short term since in the long term it could
face its extinction.

 Profit maximization
 1. Profit Optimization: Set prices so that revenue is as large as
possible relative to costs.
2. Satisfactory profits: They are a reasonable level of profits, a level
of profits consistent with the level of risk that the company faces.
3. Return on investment: This is the most common profit objective, it
measures management's overall effectiveness in generating
profits with available assets. The higher the return on investment,
the better the company's position.

 Maintain or improve market share

This objective is assumed by many companies since they consider that

maintaining or increasing market share:
1. Efficiency indicator
2. Allows you to reduce unit costs and increase long-term profits

 Increase sales volumes

The objective is to achieve a greater number of sales, for this reason

they set a price that aims to intensify sales, and giving less importance to
profits. This is because their true underlying objective is market
participation, leaving aside profits.

 Maintain the current situation of the company

The idea is to avoid price competition, meaning that when prices are
maintained, competition is discouraged and it is necessary to make
difficult decisions.

 Market Maximization by Skimming

 It means setting high initial prices and then making gradual reductions
with the aim of exploiting the different market segments.

 Achieve leadership in product quality

A company can aspire to be a market leader in product quality, which

can be accessible luxuries, meaning that the products are characterized
by high levels of quality, taste and status. But with a price not too high to
be within reach of consumers.

 Social responsability

Companies can sacrifice higher profits on sales with a price target that
recognizes their obligations to customers and society at large.

 Market penetration

There are some companies that set relatively low prices with the aim of
stimulating market growth and taking over a large part of it.

 Partial or full recovery of costs

Applied to non-profit organizations and public sector organizations with

the objective of being able to pay at least part of the cost of the good or
service.

Importance of price for the seller

Price is the key to the income of all organizations since the profits generated by
each of them depend on this, since in general a price must always be charged
that leaves a fair profit.
The price affects the competitive position of companies and their participation in
the market, in addition to the fact that the company sells for its subsistence. So
pricing is vital not only for buyers but for sellers as well.

En el caso de algunos
El precio de un productros el incremento del
producto tiene un precio causara un ingreso por
numero de ventas, para otros la
efecto importante en reduccion de precios tambien
las ventas podria dar origen un mayor
cantidad de ventas

Por tanto el precio si

tiene incidencia directa
en los ingresos de una
empresa y sus
beneficios y utilidades

 Comparison of new products

- Top-of-the-market pricing is a strategy of setting a high price for a new

product to maximize revenue.
The product image must reflect the cost
There must be a sufficient number of buyers willing to purchase the
product for that price
The costs of producing a smaller volume should not be so high that they
eliminate the advantage of charging more.
 - In market penetration pricing, a low price is set for a new product,
seeking to attract a large number of buyers and gain a significant market
share.
Production and distribution costs must decrease as sales volume
increases
Low prices should help prevent the entry of competitors.

 Comparison with private and generic brands

The company may send comparison buyers to set the price and evaluate
competitors' offerings. You can acquire price lists from competitors and
buy their product and dismantle it. You can ask buyers how they perceive
the price and quality of each competitor's offering.
However, the company must be aware that competitors could change
their prices in response to the company's price.

 Consumer price sensitivity

When we talk about sensitivity we really mean the ability of an element to

affect the price through changes in demand.

Importance of price in the consumer's mind

To establish a pricing policy, it is necessary to have a good knowledge of

customers' purchasing behaviors, the value that a product or service represents
for them, as well as the image they have of them.

The buyer is the one who can make the offer to be able to acquire what is being
offered, which forces the seller to stand out in some way not only in his product
but also in a competitive price that generates profits with respect to the
competition, although not always the The lowest prices are indicated since this
will depend on the customer's perception of the product or service.
The abilities of many consumers to satisfy their needs and desires will depend
on prices. Consumers expect and look for a better value in the goods and
services they acquire. Value is the ratio of perceived benefits to price.

When a product is stated to have good value, it does not necessarily mean that
it is inexpensive or very low priced; good value rather indicates that a particular
product has the kinds and amounts of potential benefits such as quality, image,
and convenience. shopping.

Most consumers are somewhat sensitive to price, but they are also interested in
other factors such as brand image, store location, service, quality and value.
The consumer is an emotional and not a rational being, otherwise advertising
would not make sense.

In addition, there are some psychological aspects of price that must be taken
into account by executives and marketing, such as the fact that consumers rely
a lot on price as an indicator of product quality. Especially when they make
purchasing decisions without having complete information, consumers'
perception of the quality of a product can also be influenced by the reputation of
the store, advertising or promotion of the product, in addition to other variables.

The price is not only the amount of money paid to obtain a product, but the time
used to obtain it as well as the effort and inconvenience necessary to obtain it.

Brand
emotional perception
Corporate image
 Identity
Visual aspects of the
brand in general

Logo
Identifies a company
in its simplest form
through the use of a
brand or icon

Price components

Cantidad invertida
Los procesos por los que
pasa un producto en su
elaboración forman parte
de la cantidad que se le
pide al cliente a cambio de
la mercancía.

Beneficios Margen de
Ganancia
Para distinguirse de la
competencia, las firmas Se refiere a la diferencia
comerciales implementan que hay entre el precio
beneficios en sus de venta y la cantidad
productos diferentes a que se invirtió en la
los de la competencia. elaboración, así como la
Estos tienen como fin cantidad de personas
atrapar una mayor que contribuyeron en el
cantidad de clientes. trabajo.
Function of price as a regulator of production

We can highlight that the price is fundamental since for an entrepreneur it

allows him to decide what things he is going to produce and in what quantities.
Thus depending on the market price, as well as depending on the consumer's
reaction to the price of the product. If, in the event that the product market has a
rapid fluctuation, there will be a tendency in which producers accelerate the
same, otherwise it will be necessary to reduce it.

The variation in price is another important factor since in the event that due to
the price the product rises, so to speak, there will be a noticeable acceleration
in production. Likewise, if it happens negatively that the product stagnates,
there is the possibility of abandonment. of the production.

The prices of the factors of production depend on:

- The earnings
- The interests
- The salaries
- And the income

The variation of each of these factors has an immediate impact on pricing and
production since they can change the entire environment and affect or benefit
the company.

Price and economic fluctuations

Economic fluctuations are simple accelerations and decelerations in economic

growth rates at specific times: They are the characteristic changes of any
economic process that affects certain and specific sectors, industries and
companies: changes in consumer preferences, changes in availability of
resources, changes in technologies, changes in time preferences, climate
changes, etc.
 Secular Trends:

They are movements that are

characterized by lasting over a long
period of time with respect to the
economic cycle, which are
continuous belonging to any
activity. They can occur due to an
increase in population, economic
efficiency or a gradual growth in
wealth.

 Seasonal fluctuations
They are those that occur in a year
during the seasonal period (we refer to
spring, summer, autumn and winter)
these will tend to affect a significant
degree in the economic activity
produced and are also unpredictable
fluctuations.

 Cyclical fluctuations

They are characterized by having

repetitive cyclic phases in their
contraction and expansion. Although
these oscillations differ from
continuous movements.

 Sporadic fluctuations

They are characterized by being regular due to

different external disturbances to economic activity. It is in this simplified sense
that accidental fluctuations such as hurricanes , wars, among others, are
considered.

Cycle classes
 1. Classic cycle: used until the 60s. Measured based on the levels
obtained by GDP, but the constant growth of the product of Western
countries led to a new conception.

2. Modern Cycle: it measures whether GDP is above or below its trend

level, which implies greater interest in GDP growth rates rather than its
levels.

Conclusion
Through the research work carried out on price, we can conclude that the
concept of price has a philosophical background that guides the actions of the
managers of companies or organizations so that they use price as a valuable
instrument to identify the market's acceptance or rejection of the "fixed price" of
a product or service. In this way, the best decisions can be made, for example,
maintaining the price when it is accepted by the market, or changing it when
there is rejection. However, it should not be forgotten that price is the only
variable in the marketing mix that produces income, therefore, it is essential to
maintain a healthy balance that allows achieving, on the one hand, market
acceptance and, on the other, a certain utility or benefit for the company.

Price is an essential element of the 4 P 's of the Marketing mix. The price in
every detail that it carries is of great importance since it is what marks the
purchasing capacity of each of the consumers and is a great factor that
influences, above all, the positioning of any good or product.
There are many strategies within the price, we must analyze and consider each
of them and apply them to our business ideas. The strategies will allow us to
maximize income in different ways, whether a product has a low price but can
be sold in large quantities. .
We must also take into account the laws of supply and demand since we will
have to look for the equilibrium point with an attractive price.
The price we designate will have to be consistent with the quality and image of
our product; If we are going to sell a poor quality product at a high price we will
be left out of the market.

In addition, we must work together with ethics to not cause harm to our
consumers, thus achieving objectives such as generating trust and attracting
new customers.

Through pricing conditions, companies or businesses can make their sales at

optimal prices more effective, through both internal and external factors that
have the same conditions that help regulate pricing limits, be alert to
competition, help to face decisions and in the same way to create a decisive
factor in the pricing process. In addition to all these benefits they serve as a
basis for the formulation of marketing strategies, however, there are changes in
the price of the product or service which can affect their demand, it is also
necessary to take into account the methods of pricing since they facilitate
knowledge to know when the company markets a product whose sales price
does not allow it to recover the cost of manufacturing, distribution and sale. The
price is one of the most important instruments since it is the one that integrates
commercial strategies, being a necessary pillar to keep products or services
positioned in the market, in the same way the costs and the experience curve
must be taken into account. Since these lead to their complete determination, it
is important to take into account the life cycle since through this we will have a
forecast of the product if it is growing or if it has some variation in which the
price drops, it is significant to take into account consider policies and marketing
mix.

After analyzing the price objectives, we realize that they must be explicitly
established, since to set prices this is the first step. The objectives will show us
the purpose that is intended to be achieved with the setting of prices,
considering these the pillars on which the setting is based, guiding a future with
the help of them. We also analyze that the consumer considers price an
important factor when making a purchase, although it is not always the lowest
price, the price is an indicator of various situations that may arise before a
consumer.

With respect to the components of the price, we were able to notice that these
must have a certain synchronization, so that it behaves in an adaptable way as
a company in the market: the amount invested, profits and profit margin.
Another factor that directly influences the price are the factors of production, as
well as the economic fluctuations that arise, so it is always recommended to be
prepared for the best as well as the worst of the scenarios that a company may
possibly go through over time. over time.

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