Setting the price of the product is one of most important decision the company has to make. While deciding on the price the company should incorporate all the costs associated with the product.
The cost of the product should also include the profit margin which will help the company to achieve the target returns and also the price should be competitive.
The price should be such which will maximize the sales of the company. While deciding on the price it is important to consider the price offered by the competitor and also the other benefits offered by the competitor.
Comparing only the price can lead to wrong price setting as the competitor may be offering extra or less benefits which he might have incorporated into the pricing of the product.
So the price should be such that if it more than the competitor then the product quality or the other benefits should justify the difference in the price. Sometimes company can ask premium from its customers based on the past history of good quality or the brand name.