Each business organization wants to set a price which does not just cover all the costs incurred by the company but will also generate a sizable mark-up for the company. The profitability objective will be taken into account by having a sensitivity analysis which looks at the changes in profit when prices and volume varies. It should be noted that volume sales is often inversely related to price, that is, the lower the price the higher the volume and vice versa. In order to meet the volume objective, I will make sure that the price set will encourage the purchase of the desired volume. Next, in order to meet the competition objective, I will conduct a survey of the pricing of the different brands in the market to make sure that the price charged is at par with the local industry. Lastly, the pricing should support the prestige objective. Recognizing that the young women's apparel store should have a trendy and chic image, prices should not be kept too low in order to create this image. Low prices are often equated with lower quality and mediocrity.
2. Based on the direct mail marketing materials that I have found, a lot of firms are utilizing psychological pricing in order to entice customers in buying their products. Blouses are often priced around $5.99 or $8.95 in order to have the effect of being cheaper than it really is. This pricing strategy seems to be very consistent with competing firms like Wal-Mart and even Target. ...Show more