Demand-Backward Pricing - Meaning & Definition

Published by MBA Skool Team, Last Updated: April 04, 2016

What is 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.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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