Factors influencing pricing decisions ppt. What are the 3 Major Influences on Pricing Decisions? (and Why?) 2022-10-26

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Pricing is a critical aspect of any business and is a key factor in determining the success or failure of a product or service. It is a complex process that involves several factors that can influence the pricing decisions made by a company. These factors can be internal or external to the business, and they can vary significantly depending on the nature of the product or service being offered and the target market.

One of the primary factors that can influence pricing decisions is the cost of production. A company must consider the cost of materials, labor, and other expenses associated with producing a product or delivering a service when determining its price. The cost of production can vary significantly depending on a variety of factors, such as the type of product or service being offered, the scale of production, and the efficiency of the production process.

Another factor that can influence pricing decisions is the level of competition in the market. If a company faces intense competition, it may need to lower its prices in order to remain competitive and attract customers. On the other hand, if a company has a unique product or service with few competitors, it may be able to charge a higher price.

The demand for a product or service can also influence pricing decisions. If there is high demand for a product or service, a company may be able to charge a higher price, as consumers are willing to pay more for it. However, if demand is low, the company may need to lower its prices in order to attract customers.

The target market for a product or service can also impact pricing decisions. A company must consider the income and purchasing power of its target market when determining the price of its products or services. For example, a luxury car manufacturer may be able to charge a higher price for its vehicles due to the high income and purchasing power of its target market.

In addition, the distribution channels and marketing efforts used by a company can influence its pricing decisions. The cost of distributing a product or service through different channels, such as retail stores or online platforms, can affect the final price of the product or service. Similarly, the marketing efforts used by a company, such as advertising and promotions, can also impact the price of a product or service.

Finally, external factors, such as economic conditions and government regulations, can also influence pricing decisions. For example, during times of economic recession, consumers may be less willing to spend money, which may require a company to lower its prices in order to remain competitive. Government regulations, such as taxes and tariffs, can also affect the price of a product or service.

In conclusion, pricing decisions are influenced by a variety of internal and external factors, including the cost of production, level of competition, demand, target market, distribution channels and marketing efforts, and external economic and regulatory factors. A company must carefully consider all of these factors when determining the price of its products or services.

15.2 Factors That Affect Pricing Decisions

factors influencing pricing decisions ppt

All other elements hold equal importance to the success of marketing strategies of the firm. Service providers, such as utility companies in markets in which they have a monopoly only one provider , face more inelastic demand since no substitutes are available. Yet it is critical to get your Pricing Decision process right because a wrong pricing decision can not only hurt your business and it can take a very long time to recover from it. However, there are also marketing variable costs such as coupons, which are likely to cost the company more as sales increase i. In periods of inflationary price rise, a reduction in price may lead to a reduction in demand because it has an adverse reaction on the consumers. The price is greatly influenced by several factors and the actual price which is fixed is a healthy balance of all these factors.


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Internal And External Factors Influencing Pricing Decisions

factors influencing pricing decisions ppt

Product cost and Marketing Cost. Demand — The nature and size of demand in relation to the supply of a product is another important factor affecting price. All these factors would affect pricing. These factors include: i. Legal constraints, government interference such as — control of prices, and levying of taxes are other considerations which also affect the pricing of products. These factors are as follows: 1.

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PRICING DECISIONS & FACTORS INFLUENCING PRICING DECISIONS

factors influencing pricing decisions ppt

The amount of money charged for product or service or the sum of the values that consumers exchange for the benefits of having or using the product or service. From a marketing perspective, we would also want to think about consumer perceptions of value and the benefits they receive from the product. Some retailers, such as Home Depot, will give you an extra discount if you find the same product for less somewhere else. Price is not the indicator of quality alone. So, pricing decisions must be linked with these elements so as to consider the effect of price on promotion, product and distribution, and effect of these three elements on price.

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Factor Influencing Pricing Decisions (With Diagram)

factors influencing pricing decisions ppt

Costs Cost is the fundamental element in setting prices for a product or service. They disregard short-run changes in cost and demand. Non-Price Factors in Pricing Decisions : Following non-pricing factors play important roles in creating demand in foreign countries: 1 Confidence: Sometimes the importers of developed countries do not have much confidence in the quality of products manufactured in developing countries. On the other hand, in large organizations product line managers or divisional managers have the authority to set prices for the product or service. By requiring sellers to keep a minimum price level for similar products, Similarly, bait-and-switch pricing is illegal in many states. Price may take the following forms. Moral values restrict managerial behaviour.

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[PDF Notes] Factors Affecting Pricing Decisions 2023

factors influencing pricing decisions ppt

When a high level of sales is a target, then it must be recognised that this will often only be achieved by adopting a relatively lower price. Fixed costs refer to those costs that are incurred irrespective of the level of sales for a product, while variable costs refer to those costs that relate directly to the number of units sold. Factors Influencing Pricing: Internal Factors and External Factors Factors Influencing Pricing — Classified under 2 Heads: Internal and External Factors Pricing decision are influenced by many factors. Utility to the buyer, 2. As the seller is single and the buyers are much more, therefore the seller charges a relatively higher price.

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Factors Affecting Pricing Decisions

factors influencing pricing decisions ppt

For example, while sales of the iPhone remain fairly constant in the United States, the Koreans felt the phone was not as good as their current phones and was somewhat obsolete. It could be slightly raised once the product is established. External Factors : The pricing decision can be affected by factors that are not directly controlled by the marketing organization. The calls for charging a high price to cover such quality and high cost of research and development. Quality and Service — An article may be sold at a higher price if the quality of the product is better than that of the other firms or if a firm provides better services to its customers. Unless there are chances to increase sales by reducing the price, reduction in prices or fixing a low price for the product in comparison to others is not regarded a good strategy.

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Factors Affecting Pricing Decision Marketing Ppt Powerpoint Presentation Slides Ideas Cpb

factors influencing pricing decisions ppt

Pricing is the only element in marketing mix accounting for demand and sales revenue. In general, a company will assign fixed cost to individual products if the company can clearly associate the cost with the product, such as assigning the cost of operating production machines based on how much time it takes to produce each item. It should be noted that not all companies view price as a key selling feature. This is not to suggest that price cutting is not an option — it can be a useful tactic to gain short-term advantage — but it will always be difficult to sustain. Internal Factors: Internal factors are those factors that are within the control of the firm. Value Based Pricing: Setting price based on buyers perceptions of value rather than on the sellers cost.

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Factors influencing international price

factors influencing pricing decisions ppt

Marketing Mix Strategy 12. Discount, credit sales, and price allowances are important issues related to seasonal factor. In recent years, many automobile companies have kept prices below cost in order to survive. Everything you need to know about the factors affecting pricing decisions. In other words the value exchanged for use of the benefits of a certain product or service.

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Influencing Factors

factors influencing pricing decisions ppt

Recall from the five forces model discussed in The Economy and Government Laws and Regulations The economy also has a tremendous effect on pricing decisions. If a company aims at survival, the price should be low. Maximize Profits: Older products that appeal to a market that is no longer growing may have a company objective requiring the price be set at a level that optimizes profits. The existing firms, therefore, set a price which will forestall competition. Therefore no seller can afford to under estimate these factors. In an oligopolistic market, there are few sellers and buyers which are conscious about the pricing and other marketing strategies of competitors. For marketers the important issue with elasticity of demand is to understand how it impacts company revenue.

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LESSON

factors influencing pricing decisions ppt

Customs and tastes of foreign customers may differ widely which the product must be adopted to the needs of the foreign customers. Also, that includes in the price determination process. A firm will set a price that will at least cover the total production costs. Obviously, the chance of nothing else changing in the market but the price of one product is often unrealistic. Price regulations can come from any level of government and vary widely in their requirements. Often they even do not know each other. If a business has low costs, then it can increase its sales and profit by lowering the price of its product.


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