Price Analysis-Have you ever heard about it- even if not, one could easily recognize as the name itself suggest analyzing the price. Everyone would have done this haven’t you! Today I went to market to buy some groceries .I was astound to see the price of a branded food product inclined half above its price than last month .wouldn’t you ask yourself why is that ,of course you would have. We will try to analyse the price of the same commodity from previous purchases till now. This is of a buyer perspective of price analysis what about the seller perspective of price analysis, so now it’s time to define the price analysis in its economic terms.
The price analysis is the process of examining and evaluating a proposed price to determine if it is fair enough without parting it down and without estimating its cost of the elements in it separate.
Hence a seller would do the price analysis to estimate the price of his product. There are different price analysis techniques for the ease of purchasing or selling goods and services. Techniques for price analysis can be found in the Federal Acquisition Regulation (FAR).
- Comparison of competitive market prices-for instance at micro level wanna buy a tooth paste –compare Colgate price and pepsodent price and go for the best.
- Similar item comparison-for instance think about opting a tooth powder or a tooth paste, but never compare a facial cream with crack cream since both are creams ! They serve different purposes.
- Comparison between prior quotations and published price lists in case of contracts and bids.
- Applying the administrative cost factors, transportation costs, property factors etc.. if it is of broad scale.
- Even a general internet search could also be a part of price analysis strategy.
Here I would like to remind people may misconceive cost analysis to price analysis. Cost analysis is analyzing the cost of the product by summing up the cost of all the elements used in the manufacturing process. It depends upon the different factors like material, labour, equipment and overhead but where as the price analysis doesn’t depend upon them.
Perceiving this price analysis close by, we will take for instance a simple case let’s say – why is an apple iPhone so expensive in the market.
The apple corporation develops an iPhone and proposes its price in the market .The first factor is the brand value of the apple that’s from ages. The obvious answer why do apple sells its product so expensive is because it can. People started buying its previous products for higher rates this in turn may depend upon several factors like the quality of the product, features it provide…
The second, there is an entity in between the manufacturer and the consumer or end user it’s called to be Market .The product shifts from one hand to another in the market from the manufacturer to wholesaler from there to a retailer from retailer to finally an end user .In the due process the raise in the price depends on factors like transportation, demand of the product. The entry level price of an iPhone 5s is just 199$ where the consumer finally buys it for around 500$.At every stage everyone uses this price analysis and grabs how much they could possibly.
So about buying a grocery probably when we are buying the product the company which is marketing it, must be evaluating it depending upon the rate at which the units are being sold. As a matter of fact this also is in the hands of a consumer eventually the key player in deciding the price of a commodity .So act wisely, do the price analysis and save your penny.
There are courses available in the market on this price analysis to acquire knowledge and apply it in respective fields of management.
- A Guest post by Siva Nagendra .S