Reverse price analysis
Reverse pricing offers an opportunity for customers to determine their pricing requirements independently without accessing cost data from the suppliers. The process of suppliers sharing data with purchasers is a sensitive process. In the modern world, data is considered as one of the essential business assets. Supplier’s endeavor to enhance data privacy and confidentiality through declining to share data with other parties such as product purchasers. As a result, purchasers turn to reverse pricing strategy. Reverse pricing enables sellers to enhance their business competitiveness. Reverse price analysis can be perceived as a value based pricing strategy where decisions to determine price are made through consumer perceptions instead of basing the prices of supplier guesses (Chen et al., 2019). In reverse pricing strategy, buyers have more leverage compared to other pricing models. Reverse pricing is however restricted to specific markets and unique market conditions.
Reverse pricing strategy is derived by adding the costs involved in production of a unit of a commodity. Other factors considered in determining the price of a product through the reverse strategy include the man hours taken in the production of a product (Li et al., 2020). The man rate is calculated per hour. The other factor included in determination of price of a commodity includes additional costs such as expenses incurred in storage of a product and security costs.
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Reverse pricing strategy is one of the most effective strategies deployed in situations where suppliers cannot disclose costs involved in manufacturing a product. The use of reverse pricing helps to eliminate pricing errors that emanate from the use of hues work in determining price. In reverse pricing, the buyer is unaware of the price set by the seller. On the other hand, the seller sets a minimum price for a product or a service (Liu & Xiao, 2019). The buyer gets the opportunity to determine the price after submitting their bid. The bid price is deployed in a transaction when it emerges as greater or equal to the minimum set price.
References
Chen, D., Ignatius, J., Sun, D., Zhan, S., Zhou, C., Marra, M., & Demirbag, M. (2019). Reverse logistics pricing strategy for a green supply chain: A view of customers' environmental awareness. International Journal of Production Economics , 217 , 197-210.
Li, T., Yan, D., & Sui, S. (2020). Research on the complexity of game model about recovery pricing in reverse supply chain considering fairness concerns. Complexity , 2020 .
Liu, Y., & Xiao, T. (2019). Pricing and collection rate decisions and reverse channel choice in a socially responsible supply chain with green consumers. IEEE Transactions on Engineering Management , 67 (2), 483-495.
