Price analysis explained

Price analysis is the study of how a price relates to other things such as product demand. Its specific meaning varies in contexts such as marketing and general business.

Key Aspects of Price Analysis

1. Demand and Supply: Understanding how the price of a product influences its demand and supply in the market. Higher prices may reduce demand but increase supply, while lower prices can have the opposite effect.
2. Market Conditions: Analyzing how economic conditions, market trends, and consumer behavior impact pricing strategies. This includes considering inflation, economic growth, and changes in consumer preferences.
3. Competitor Pricing: Examining the pricing strategies of competitors to determine how they affect a company's pricing decisions. This includes benchmarking against competitors and identifying opportunities for competitive pricing.
4. Cost Analysis: Evaluating the costs associated with producing and delivering a product to determine its pricing. This includes fixed and variable costs, as well as overhead expenses.
5. Pricing Strategies: Developing strategies to optimize pricing, such as penetration pricing, skimming pricing, and value-based pricing. These strategies are designed to achieve specific business objectives like market penetration or profit maximization.
6. Consumer Perception: Assessing how consumers perceive the price of a product relative to its value. This includes understanding price sensitivity and the psychological impact of pricing.
7. Regulatory Environment: Considering the impact of government regulations and policies on pricing. This includes compliance with price controls, tariffs, and taxation laws.

Importance of Price Analysis

• Informed Decision-Making: Provides businesses with the necessary information to make informed pricing decisions.
• Competitive Advantage: Helps businesses stay competitive by understanding market dynamics and adjusting prices accordingly.
• Profit Maximization: Aids in setting prices that maximize profits while maintaining customer satisfaction.
• Market Positioning: Supports effective market positioning by aligning pricing with brand strategy and market expectations.

Applications of Price Analysis

• Marketing: Used to develop pricing strategies that align with marketing goals, such as attracting new customers or increasing market share.
• Business Planning: Integral to business planning and financial forecasting, helping businesses plan for revenue and profit targets.
• Economic Analysis: Utilized in economic analysis to understand broader market trends and their impact on pricing.

Marketing

In marketing, price analysis refers to the analysis of consumer response to theoretical prices assessed in survey research.

Business

In general business, price analysis is the process of evaluating a proposed price independent of cost and profit.^{[1] [2]} Price analysis began in 1939 when economist Andrew Court decided to analyze prices to better understand the environmental factors that influence this practice.^[3] Price analysis is dependent on the characteristics of the marketing system in place within a certain country.^[4] In developing countries researchers use it to help better understand data.^[5]

Other

The term may refer to converting a price to a unit price, e.g., per unit of area.

Notes and References

1. Federal Acquisition Regulation 15.404-1(b) - Proposal Analysis Techniques, accessed 22 January 2019
2. FAA Web site: 16. Price Analysis . 2011-08-31 . dead . https://web.archive.org/web/20110930081610/http://fast.faa.gov/archive/v799/pricing/98-30-C5.htm . 2011-09-30 .
3. Goodman. Allen C. 1998-09-01. Andrew Court and the Invention of Hedonic Price Analysis. Journal of Urban Economics. 44. 2. 291–298. 10.1006/juec.1997.2071. 154205079. 0094-1190. https://web.archive.org/web/20200212104448/https://pdfs.semanticscholar.org/4dcb/5567cc9c9c51ad2e2b48a4e2c491dc245ec6.pdf. dead. 2020-02-12.
4. Jones, William O. "The structure of staple food marketing in Nigeria as revealed by price analysis." Food Research Institute Studies 8.1387-2016-116153 (1968): 95-123.
5. Book: Trotter, B. W.. Applying price analysis to marketing systems: Methods and examples from the Indonesian rice market. 1992. Natural Resources Institute. 978-0-85954-315-6. 3. Chatham, UK. en.