How to determine the market price of goods

In conditions of market competition, companies are forced to literally fight for their customers. The market value of the goods is one of the instruments of this struggle; this is the most probable price at which the products will be sold on the market. From a reasonable calculation of this value depends on the success of the trading activity of the enterprise and, accordingly, its profit.

Instruction manual

1

Two parties are involved in setting market value: buyer and seller. A company that sells goods on the market is trying to establish such a value that could cover all costs for the purchase of raw materials and production, its sale, and, in addition, bring net profit. Thus, the market value of the goods for the seller cannot be lower than its cost, otherwise the company will operate at a loss.

2

The buyer, of course, also takes part in the formation of market value, since it is he who makes the demand for a particular product. However, the ratio of supply and demand in this case is one of the decisive factors. The consumer of the product has an idea of ​​the current market prices for similar goods from other manufacturers, and makes a purchasing decision based on his own financial capabilities, needs and, of course, the quality of the goods.

3

The interests of the producer and consumer will be satisfied if the market value of the goods exceeds the value of its cost by the amount of the producer’s intellectual capital embedded in the products. The balance of interests of the seller and the buyer is called market equilibrium. The profit of the enterprise will be an additional margin on the product, which is determined depending on the amount of expected income per unit of product.

4

The cost of goods covers all costs of the enterprise for its production and includes the cost of the purchase of raw materials and equipment, labor costs and advertising. This concept is widely used in economic theory. The intellectual capital of a producer is determined on the basis of an analysis of the production process, from the development of an idea to its implementation in a material unit of production.

5

The development of an idea is a creative component and is carried out by employees of several departments, including the marketing department, which closely interacts with consumers through marketing research and surveys. Then, based on the final idea, a technical solution is developed, possibly creating an exclusive industrial design that requires a patent.

6

Based on the test results of industrial prototypes, the details of the future unit of production, the appearance, and refinement are being finalized. Then mass production of goods is launched.

7

As a rule, intellectual capital is laid in the cost of a unique product, which has no analogues in the market. In this case, the company has the right to set its price, since competition is close to zero. If the product is not unique, you should reasonably approach the formation of margins, future profit depends on it.

8

There are three methods for calculating the market value of a product: costly, market (comparative) and profitable. The cost-based method is based on the principle of “production costs plus profit”. The prices of goods determined by this method are called cost-oriented prices.

9

The comparative method involves searching the market for products from other manufacturers that are similar to the proposed product. There is a price comparison, however, this method is only suitable if employees of the enterprise have access to information on prices of trade deals of other manufacturers.

10

The income method involves predicting expected revenues and laying them in the formation of the market value of products. The advantage of this method is that it is more aimed at obtaining net profit, while its application is closely related to two other methods.