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Pricing Rationale

             There are three major considerations to setting prices for goods and services. These are customers demand schedule, the cost function, and the competitors" prices. Companies must therefore select a pricing method that includes one or more of these considerations1. This paper will briefly assess pricing rationale for computers at three point-of-purchase locations i.e. online, retail chain, and discount store.
             The pricing rationale of computers online may be described as value pricing. Value pricing is a method that charges a low price for a high-quality offering. The computer industry has become a highly competitive industry. Online computer selling has become even more competitive, necessitating the setting of lower prices compared to those of competitors. It is a matter of reengineering the operations to become low-cost without sacrificing quality, and lowering prices significantly to attract a large number of value-conscious customers. The availability and ease of price comparison over the Internet, has made it imperative for products offered for sale online to be priced in an extremely competitive manner. Competitors" prices and the price of substitutes provide an orienting point1.
             The retail chain point-of-purchase rationale of pricing for computers may be described as perceived-value pricing. This pricing rationale sees the buyers" perceptions of value, not the seller's cost, as the key to pricing1. Gatewayr computer stores is a retail chain that markets its brand of computers. Gatewayr encourages customers to come shop in their store in order to show how valuable their products are. The store setting and the ambience is an attempt to make the customer perceive a value that may result in the customer paying a price higher. The key to perceived-value pricing is to create a high perception of the computers value.
             The pricing rationale of the discount store can be described as a variation of the value pricing, termed as everyday low pricing (EDLP).

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