Demand-Backward Pricing

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Definition: Demand-Backward Pricing

Demand-backward pricing is a demand-oriented pricing method in which the price of a product is determined by approximate prices what customers are willing to pay. But it is also important that loss is not incurred in this case.

This allows manufacturers to deliberately adjust the quality of the product in order to achieve the target price, in case sales are low.

This method is commonly used for the pricing of women's and children's shopping items (like clothes, shoes, beauty products, toys), gift items (as buyers of such products typically decide in advance how much they are willing to spend on them) and pharmaceutical products (as buyers have little choice but to pay the price). So, it can be concluded that this model is used more effectively for those goods and services whose price elasticity of demand is relatively inelastic.

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