Parametric methods of pricing

Technologies of calculation methods, under which the price for similar products is calculated, are called parametric methods. These parametric pricing methods create a parametric series that adequately describes approaches to the formation of prices for types of products that have approximately the same characteristics as needed and physicochemical properties. In addition, parametric pricing methods are used when the consumer characteristics of goods can be accurately established in quantitative terms. Only in this case, the commodity output can be reflected by means of a parametric series, for example, various machines for functional purpose, described in terms of their capacity. There are several such parametric indicators, for example: power, consumed electricity, time of non-stop work, and others. The cost in such cases can be calculated by relative correction of the prices of all other goods in relation to the base. In this case, if the price is set taking into account the fact that the basic parameters themselves can change, this pricing method is called parametric. In the simplest form, it can be reflected by the following relationship: U (n) = U (b) * (KP), in which: U (n) is the unit cost of the new product, U (b) is the cost of the base, Parameters that occurred in the new product in relation to the base.

Parametric methods of pricing include the normative-parametric method. The essence of it is that the new price with its help is calculated taking into account the costs per unit of the selected parameter. In this case, the formula will look like this: U (n) = U (s) + H (s) * {KP}, where H (s) is the established cost norm per unit of the selected parameter. And in the first and second cases, the formulas can be adjusted taking into account the possible application of any preferences in determining the price of the goods.

On the basis of such basic principles of the parametric pricing methodology, for example, the unit price methodology is developed. As practice shows, it is used in the formation of the price of goods for any one basic quality parameter. The main indicator here is the so-called unit price, which is characterized by a particular division of the value of the main parameter into the leading main quality parameter. To avoid errors and improve the accuracy of the results obtained, this method is used only to obtain preliminary or indicative estimates, since it takes into account only one parameter when pricing. To compensate for this deficiency, parametric pricing methods include methods of scores and regression.

It is important to take into account that pricing policy is determined not only by the pricing methods used. It is formed under the influence of a wide range of factors, including external ones. As one of the most influential factors is the type of market where the firm or enterprise is present or where it is going to be present. Today there are four main types of them. As a rule, pricing on different types of markets has its own characteristics, which should be taken into account when forming a business strategy. For example, if a decision is taken to operate in a pure competition market , then one should be aware that with a lot of participants operating on it, practically none of them alone can have a significant impact on market conditions. But in the market of monopolistic competition, although there are many participants, the goods are purchased at prices set by the leading monopoly producer.

Similarly, when the price of a product is formed, its value is influenced by pricing of production factors. The peculiarity here is that the behavior of participants in the market is described not just by the usual action of the law of supply and demand, but also by the regularity of demand for production factors at lower prices.