METHODS OF PRICING

By James Alden S. Magbanua

4 METHODS OF PRICING
-Replacement cost
-Market comparison
-Discounted cash flow / net present value
-Value comparison
Replacement Cost Method
-It supports a price by answering the question, “How much would it
cost to replace?”

- The replacement cost method involves arriving at an asset's value by

reference to the present-day cost, in an arms-length transaction, of
replacing that asset with a similar asset in a similar condition
The Market Comparison Pricing Method
-It supports a price by answering the question, “How much are other
things like it selling for?

- It’s when a price of a product is set according to current market prices

for the same or similar products. In other words, market-based pricing
means setting prices in line with your competitors and the prices of their
products.

-Market comparison is a very common way to price offers: find a similar

offer and set your price relatively close to what they’re asking.
The Discounted Cash Flow (DCF) / Net Present Value (NPV)
Pricing Method
-It supports a price by answering the question, “How much is it worth if it
can bring in money over time?” 
-Discounted cash flow (DCF) refers to a valuation method that estimates
the value of an investment using its expected future cash flows.
-It also attempts to determine the value of an investment today, based on
projections of how much money that investment will generate in the future.
The Value Comparison Pricing Method
-It supports a price by answering the question, “Who is this particularly
valuable to?” 
-Value-based pricing is the method of setting a price by which a company
calculates and tries to earn the differentiated worth of its product for a
particular customer segment when compared to its competitor.
-Value Comparison is typically the optimal way to price your offer, since
the value of an offer to a specific group can be quite high, resulting in a
much better price. Use the other methods as a baseline, but focus on
discovering how much your offer is worth to the party you hope to sell it
to, then set your price appropriately.
THANK YOU!