Price determination is the recording of functional relationships to determine a price based on target criteria.
The target criteria for determining the price can, for instance, be the optimum price in terms of turnover or profit. A frequently considered functional relationship is that which exists between price and quantity sold. Essentially, a distinction can be made between demand-oriented and cost-oriented pricing. The demand-oriented price determination takes the customer’s sense of value into account. This sense of value can be ascertained, for example, by means of price sensitivity analyses or test markets. In contrast, cost-oriented pricing is based on the costs incurred. This can be done based on partial or full cost accounting. Common methods in this area are the cost-plus method, mark-up pricing or target return pricing.