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For the remainder of this tutorial we look at factors that affect how marketers set price. The final price for a product may be influenced by many factors which can be categorized into two main groups:
- Internal Factors - When setting price, marketers must take into consideration several factors which are the result of company decisions and actions. To a large extent these factors are controllable by the company and, if necessary, can be altered. However, while the organization may have control over these factors making a quick change is not always realistic. For instance, product pricing may depend heavily on the productivity of a manufacturing facility (e.g., how much can be produced within a certain period of time). The marketer knows that increasing productivity can reduce the cost of producing each product and thus allow the marketer to potentially lower the product's price. But increasing productivity may require major changes at the manufacturing facility that will take time (not to mention be costly) and will not translate into lower price products for a considerable period of time.
- External Factors - There are a number of influencing factors which are not controlled by the company but will impact pricing decisions. Understanding these factors requires the marketer conduct research to monitor what is happening in each market the company serves since the effect of these factors can vary by market.
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It could be that there is not much oil which means less gas which means higher prices to the oil companies. It could also be that oil companies and nations just want money and raise the prices.
Taking pricing decision is one of the critical factors of business. to take the pricing decision a proper research needs to be carriedout such as on the product availability, competitor's pricing strategy, customer's perceived pricing, customers willingness to pay the price of the product, demand factor etc. The pricing decision influences the demand of the product in the market, the pricing strategy of the competitors, the profitabilty of the company and the most important is the customer decision on purchasing the product such as which barnd product to but and which not, which will give the major satisfaction to the customer by rendering the higher value at the lesser price then the competitors.
There are three main considerations a business must look at when setting prices:
- Cost - any business wants to make a profit, so knowing what costs are required to have the merchandise it required - analyze initial markup and maintained markup
- Demand - what customers will pay for the merchandise; whether or not the product has elastic or inelastic demand
- Competition - customers shop around and compare prices - make sure your prices are competitive with the other industry's offering the same proucts
Factors include: * Marketing objectives. * Accounting objectives (Costs). * Legal issues. * Competition. * Customer response to price. * Channel member expectations.
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Identify the General Influences on Pricing in Practice and discuss them in detail?
Identify the general influences on pricing in practice
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