Factors Influence on Pricing Decisions
Pricing is both an art as well as science. There is no one right way to determine the price of products or services you are selling. To a large extent, the price is based on the value customers perceive to get from the product and what they are willing to pay for it. So what factors do you need to consider when pricing your products and services?
1.Objectives of the Business : There may be various objectives of the firm such as getting a reasonable rate of return, to capture the market, maintenance of control over sales and profits etc. A pricing policy thus, should be established only after proper consideration of the objectives of the firm.
2.Cost of the Product: Cost and price of a product are closely related. Normally, the price cannot or shall not fixed below its cost (including the product, administrative and selling costs). Price also determines the cost.
3.Competitors Prices: Competitive conditions affect the pricing decisions. The company considers the prices fixed and quality maintained by the competitors for their products.
4.Distribution Channels Policy : The nature of distribution channels used, and trade discounts which have to be allowed to distributors and the distribution expenses also affect the pricing decisions.
5.Product Differentiation : The price of the product also depends upon the characteristics of the product. In order to attract the customers different characteristics are added to the product such as quantity, size, color, alternative uses, etc.
6.Economic Environment : In recession period, the prices are reduced to a sizable extent to maintain the level of turnover. On the other hand, the price and increased in boom period to cover the increasing cost of production and distribution.
7.Government Policy : Price discretion is also affected by the price control by the government through enactment of legislation when it is thought proper to arrest the inflationary trend in prices of certain
1.Objectives of the Business : There may be various objectives of the firm such as getting a reasonable rate of return, to capture the market, maintenance of control over sales and profits etc. A pricing policy thus, should be established only after proper consideration of the objectives of the firm.
2.Cost of the Product: Cost and price of a product are closely related. Normally, the price cannot or shall not fixed below its cost (including the product, administrative and selling costs). Price also determines the cost.
3.Competitors Prices: Competitive conditions affect the pricing decisions. The company considers the prices fixed and quality maintained by the competitors for their products.
4.Distribution Channels Policy : The nature of distribution channels used, and trade discounts which have to be allowed to distributors and the distribution expenses also affect the pricing decisions.
5.Product Differentiation : The price of the product also depends upon the characteristics of the product. In order to attract the customers different characteristics are added to the product such as quantity, size, color, alternative uses, etc.
6.Economic Environment : In recession period, the prices are reduced to a sizable extent to maintain the level of turnover. On the other hand, the price and increased in boom period to cover the increasing cost of production and distribution.
7.Government Policy : Price discretion is also affected by the price control by the government through enactment of legislation when it is thought proper to arrest the inflationary trend in prices of certain