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Pricing: Definition & important aspects for buyers
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Pricing in a nutshell:
Pricing describes the systematic process of determining and setting prices, taking into account costs, the market situation and strategic objectives. An understanding of pricing mechanisms is essential for purchasing in order to negotiate fair prices and realize sustainable cost savings.
Example: An automotive supplier calculates the price for a component by adding the material costs (€40), production costs (€25), overheads (€15) and a profit margin of 20%, resulting in a sales price of €96 per unit.
Contents
What is pricing?
Pricing refers to the process of setting prices for goods or services on a market. It is influenced by the interplay of supply and demand as well as internal and external factors such as production costs, competitive pressure and market analysis. In the context of purchasing, an understanding of pricing is essential in order to procure products and services at fair and competitive conditions.
Core elements of pricing
Importance of pricing in purchasing
Pricing is of central importance for purchasing, as it has a direct influence on procurement costs and therefore on the company's profit margins. A sound understanding of pricing enables buyers to optimize costs, conduct effective negotiations and make strategic procurement decisions. This leads to competitive advantages and strengthens the company's position in the market.
Pricing: From cost-covering calculation to value-based pricing
Based on the theoretical foundation of pricing, it is crucial in practice not only to calculate prices internally, but also to align them with market analysis and customer preferences. The traditional method of pricing is reaching its limits in a dynamic economy, which is why a transformation towards modern approaches is necessary. This development enables companies to remain competitive and maximize added value for customers.
Old: Cost-covering calculation
Traditional approach: Traditional pricing is based on a cost-covering calculation in which all costs incurred are added together and a profit margin is added. In practice, tools such as activity-based costing and simple spreadsheets are used for this purpose. This method focuses on internal factors and ensures that all expenses are covered. However, it ignores market conditions and customers' willingness to pay, which often leads to competitive disadvantages. The main problems are a lack of flexibility, low market and customer orientation and risk management.
New: Value-based pricing
Value-based pricing: Modern approaches rely on value-based pricing, in which the price is based on the perceived value of the product or service for the customer. Market research tools, big data and customer insights are used to gain deep insights into customer needs and willingness to pay. Innovative technologies such as AI-supported analyses and price optimization software enable more precise pricing. This leads to improved margins, greater customer satisfaction and stronger differentiation from competitors.
Practical example: Software company increases sales through value-based pricing strategy
A medium-sized software company implemented value-based pricing and was able to increase its return on investment by 25 % within a year. Through detailed customer analyses, it recognized the high utility value of specific features for certain customer groups. This resulted in pricing that exploited the willingness to pay of these segments. In addition, customer loyalty increased by 30% as the perceived added value was clearly communicated and delivered.
Conclusion on pricing
Pricing is a complex but crucial process in strategic purchasing. Significant savings can be achieved through an understanding of cost structures, targeted negotiation strategies and the development of long-term supplier relationships. Success lies in the combination of sound market knowledge, an analytical approach and the skillful use of modern technologies. Only those who master the mechanisms of pricing can create sustainable competitive advantages for their company.
