The firm may price its products lower than its competitor to prevent their entry in the market or at times, set its price equal to its competitor so that market is stabilised. Survival, market share leadership, current profit maximisation and product quality leadership are some of the general objectives of the firm. The factors affecting price determination can be categorised as follows: Internal Factorsįollowing are the internal factors influencing pricing decisions:įirms devise both specific as well as general objectives. The pricing policies must fall in line with pricing objectives.
There are numerous factors that affect marketing decisions. Thus, maketers need to take exact and premeditated pricing decisions. Pricing is one Of the strongest marketing instruments that the company possesses, Pricing decision is an important aspect of a marketing plan. In particular, pricing is the process of formulating objectives, deciding the flexibility that is available, devising strategies, setting prices, and implementing and controlling the above elements. Pricing can be defined as the task of deciding the monetary value of an idea, a product or a service by the marketing manager before he sells it to his target customers. The method used to convert the worth of a product or a unit of service into quantitative form (i.e., rupees and paisa) at a given time for customers is called ‘pricing’. A product’s price is based on the seller’s decision regarding its monetary worth to the buyer. It can conceptually be defined as: Price = (Quantity of money received by the seller) / (Quantity of goods and services rendered' received by the buyer)Īs per this equation, the numerator as well as the denominator is crucial while taking price decisions. For a customer, price is something he sacrifices for owning the product or service and therefore, it displays his perception for the product value. For a manufacturer, price is that amount of money (or in case of barter trade, goods or services) which he will receive from the buyer for his product. Therefore, price is the most flexible component of the marketing mix. Price can be easily altered, whereas, other product aspects like channel obligations and product attributes cannot be changed so easily. The only component of marketing mix that generates returns is called price, however, only generate costs.
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