10. Pricing decisions
Factors to consider when setting prices
All profit organizations and many non profit organizations must set prices on their products or services. Simply defined, price is the amount of money charged for a product or service. More broadly, price is the sum of the values consumers exchange for the benefits of having or using the product or service.
A company's pricing decisions are affected both by internal company factors and by external environmental factors. These factors are shown in Figure 1. Internal factors include the company's marketing objectives, marketing mix strategy, costs, and organization. External factors include the nature of the market and ...view middle of the document...
We consider ourselves the "low-cost producers" in this industry. Considering that we are a company with lower costs, we have decided that we can set lower prices that result in greater sales and profits.
We watch our costs carefully. We consider that if it costs our company more than competitors to produce and sell our product, we will have to charge a higher price or make less profit, and try not to put it at a competitive disadvan¬tage.
External Factors Affecting Pricing Decisions
The Market and Demand
Costs set the lower limits of prices, while the market and demand set the upper limit. Both consumer and industrial buyers balance the price of a product or service against the benefits of owning it.
Before setting the final price for our product we had to understand the relationship between the price and the demand for our product. At the beginning we shall see the people’s reaction toward the Lazzzzerlight Product Machine.
Other External Factors
When setting the final price, we must also consider other factors in our external environment. For example, economic conditions can have a strong impact on the results of our company’s pricing strategies. Economic factors such as inflation, boom or recession, and interest rates affect pricing decisions because they affect both the costs of producing a product and consumer perceptions of the product's price and value.
Pricing an Innovative Product
Because we want to price an...