External Factors That Affect Pricing Decisions

External factors that affect pricing decisions * 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. i) The nature of the market and demand ii) Elasticity of demand iii) Competitor’s cost, price and offers iv) Inflation and deflation v) Interest rate vi) Reseller reaction vii) Social consideration viii) Government policies and regulation ix) Customer Expectation

i) The nature of the market and demand
- have knowledge about the relationship between market and demand
Types of market a) Perfect competition
- one in which every firm is to small to affect the mark price
- many buyers & sellers
- homogeneous product
- free entry and exit
- perfect knowledge of price cost ( no control over price)
- perfect price elastic

b) Monopolistic competition
-many buyers & sellers
-differentiated products which are close substitute
- Free entry but firms only can product close substitutes
-Some control over price
-less perfect price elastic

c) Monopoly
-single firm
-perfect differentiated product without close substitute
-strong barrier to entry
-control over price
-price inelastic

ii) Elasticity of demand
Elasti

Ref

i) http://www.studylecturenotes.com/management-sciences/marketing/92-pricing-product-external-and-internal-factors-affecting-price-decision ii) http://2012books.lardbucket.org/books/principles-of-marketing-v1.0/section_18_02.html iii) http://www.knowthis.com/principles-of-marketing-tutorials/pricing-decisions/external-factors-elasticity-of-demand/ iv)