Pricing policies

It should be quite clear by now that the manufacturer is not really free to set his own pricing policies. But any good pricing policy must be aimed at offering a reasonable price to the consumer, insuring a fair return on investment to the manufacturer, permitting reasonable growth, and providing reasonable price stability. In addition, a good pricing policy should meet competition and comply with legislative requirements.
As a matter of common sense and survival, manufacturers seek to avoid cutthroat competition, a natural outcome of unrestricted price competition. Most manufacturers also seek an element of price stability, since it is impossible to plan with any degree of confidence in periods of widely fluctuating prices.
Within the over-all framework of desirable goals, pricing policies differ widely. Manufacturers seek to make their products different and superior through trade marks. They make different prices through discounts and allowances or special terms. Again, trade practices differ, some sellers guaranteeing buyers against price declines, others giving no such guarantee. Of course, price competition is materially reduced by differences in the quality, styling, or service.
Correct pricing involves finding the best possible exchange value for the product. The modern manufacturer must not only know the worth of his own product, but he must also know what competition offers, what substitutes are available and the relative efficiency of the various channels of distribution. In addition, the manufacturer must have a good understanding of costs and he must understand, or try to understand, what constitutes value in the eyes of the consumer.