For the producer

Setting an optimal price often determines the success of a product or service on the market; therefore, setting an optimal price should appear at an early stage of the process – NPD (New Product Development). Setting a price is not a one-off activity. There should be price adjustments over the product life cycle in response to changing demand and competition.

Since at any price a product can generate different demand, the key to price optimisation is to determine to what extent the demand is price dependent.

In some cases, the sensitivity of demand to price changes can be determined directly by analysing sales data, i.e. price flexibility of demand. Most often, however, the process requires the use of more complex methods which are a combination of numerical analyses, a competitive benchmarking and price research.

The most reliable source of knowledge about the extent of price acceptance are, of course, customers. Properly designed and conducted price research reveals knowledge about the perception of value and the perception of prices by customers. Methods of testing the individual product price, i.e. testing the price acceptance range, testing the intention to buy at a certain price are usually appropriate in the early stages of the development of new products, while methods of competitive product price testing introduce a market context and are usually applied to products already sold on the market.

Producers with a large number of products available should make their pricing decisions in a coordinated manner – taking into account the effects of substitution and complementarity in the product line.

Additionally, companies operating in different distribution channels and in many markets face the challenge to have a consistent effective pricing policy. The solution to this problem is to develop pricing processes to make prices more consistent between markets and sales channels and to seal the margin leaks.