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Related to pricing methods: Pricing objectives
pricing methodsthe approaches used by firms to PRICE goods or services. Three basic pricing methods may be distinguished:
- a COST-BASED PRICING method which relates the price of a product to the costs involved in producing and distributing it;
- a DEMAND-BASED PRICING method which relates the price of a product to the intensity of total demand for it and acknowledges differences in demand intensities between subgroups of buyers;
- a COMPETITION-BASED PRICING method which relates the price of a product to the prices charged by rivals. In practice, firms use a combination of these methods in setting their prices. Other pricing methods include: conversion cost pricing, target pricing, variable-cost pricing, marginal-cost pricing and return on investment pricing. See PRICING OBJECTIVES, PRICING POLICY.