Management accounting / ABC method Essay Example
The other way of altering the firm’s costing and pricing strategy that may be more beneficial to EziTax is through the use of value based pricing. In this strategy, the thinking that is adhered to by the proponents is that the optimal price charged to clients for a service or a product is a reflection of the service or product’s value as perceived by the customer (Smith, 147). This is not based on the costs incurred by the company in the providence of the service because value is obtained from customer preferences, finances, expectations and needs. Because it is the clients that determine the value of the service, Katrine should ensure that the service provided by the firm is advantageous in regard to the competitors and that the pricing strategy ensures the clients get the most value out of the service provided. Another alternative strategy that can be adopted by the firm is competition based pricing which entails setting prices that are determined by competitors’ market prices. The price arrived at will involve the identification of competitors and the assessment of the service offered by them. The price can be higher than that of the competitor or lower than that of the competitor but this is informed by the advantages as well as disadvantages in the service offered. The price can also be at par with that of the competitors. This method of pricing is advantageous because it does not need accurate market data and setting a higher price makes it seem that the service offered is of a higher quality than that of the competitor and thus influences the decision of the customer and even their perception on a service (Horngren et al., 345).
Horngren, Charles T, Srikant M. Datar, Madhav V. Rajan, Monte B. Wynder, William A. A. Maguire, and Rebecca C. W. Tan. Cost Accounting. , 2014. Print.
Smith, Tim. Pricing strategy: Setting price levels, managing price discounts and establishing price structures. Nelson Education, 2011.
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