The total cost to serve accounts for the profitability of the consumer. When evaluating the total cost to do by an organization, there are several strategies that the company will use. Key considerations are the business entity activities and the overhead costs. The actions result in expenses that the company will encounter, and they need to reflect on the price of the product (IDIS, n.p). Examples of activities include promotion and marketing of the products. The cost incurred in the activities will determine the price that the consumers will pay for the product. A key reason for engaging in the activities is because of competition. Depending on the cost of the activities, the service delivery to the consumer will be determined. If the operation cost is high, then the product's price will equally increase, and if it was standards, so will the price be standardized.
Logistics are very crucial in the pricing, such as transportation. A consumer who resides far from the point of production will pay much higher prices than those within the vicinity. Such is because of the cost of transportation to the nearby stores for ease of access by the consumers (The Park Avery Group, n.p). A key consideration is the consumer's willingness to pay the set price if the product satisfied their utility and demands. There will be a variation in proof between those who live overseas and those in the production country. There is also the issue of overhead costs such as manufacturing and producing the product that will equally determine the prices. Most of the company’s focus on the cost of labor in production before setting the prices. If the employees' skill is demanding, the cost will reflect on the pricing to remain in operations.
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References
IDIS. (n.d.). Total Cost to Serve: Working with the right video technology to increase profitability. Retrieved from 2019+e-book+Total+Cost+to+Serve.pdf (amazonaws.com) . Accessed 31 January 2021.
The Park Avery Group. (n.d.). Total Cost to Serve: Considering purchasing factors impacting sourcing costs. Be Selective. Retrieved from Parker Avery Point of View: Total Cost to Serve . Accessed 31 January 2021.
