Customer Service

Understanding the costing structure of a product or service is important when deciding the price. However, management accounting techniques are only part of the process when deciding how to price a product or service. Using examples explain what else can impact on the price of a product or service.

You need to understand your customer, your competitor and your company to best able to decide on pricing a good or a service;

Price setting is determining what the demand is for your product and understanding the price elasticity of demand in your market.

Price sensitivity needs to be considered when setting the price for any product and service; and it needs to be particularly considered when you change a price (price increases or price decreases).

* Customers are less sensitive to price increases if the product is very unique and has high value.

* Customers are more sensitive to price increases if they can easily substitute the product for a lower priced alternative.

* Customers are less sensitive to price increases when they have difficulty comparing the qualities of alternative products.

The company brand are also important, that why example Apple are able to price theirs products at a higher price than theirs competitor, because Apple product are desirable by a large public.

The cost of producing the product/service is real important as well because many companies may decide to produce a product/service at loss to retain customer on product/service more profitable. Some companies apply the 80/20 rules where 20% of sell of product/service will represent 80% of the revenue.