External factors affecting pricing decisions. Factors affecting pricing policy 2019-01-08

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External Factors: Elasticity of Demand

external factors affecting pricing decisions

Technological environment Toyota must be aware of and keep up with the technological environment which includes the forces that create new technologies, creating new product and market opportunities. Costs: Cost of a product is the single most important factor to influence the final price. Define the new price structure in the company. But as production moves up to 1,000 calculators per day, average cost falls. Usually, some combination of production and marketing specialists are involved in choosing the price. Price is only one of the marketing mix tools that a company uses to achieve its marketing objectives.

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Pricing Decisions

external factors affecting pricing decisions

Therefore there is a demand in the market for alternatives to petrol-powered vehicles, such as electric cars. Under oligopolistic competition, the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies. Some costs have elements which are partly fixed and partly variable. To become the market share leader, these firms set prices as low as possible. The predetermined objectives: While fixing the prices of the product, the marketer should con­sider the objectives of the firm. These factors are shown in Figure 1. The political environment includes laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society.

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Factors affecting Pricing Decisions

external factors affecting pricing decisions

Fixed costs also known as overhead are costs that do not vary with production or sales level. Thus standardisation is not suitable for pricing. It then developed a revolutionary automated process for mass-producing the new watches and exercised strict cost controls throughout the manufacturing process. For example, a manager of a business that is the patent holder and the only supplier of a new wonder drug will act differently than a manger of a firm trying to survive in the very competitive fast-food industry. Similarly, bait-and-switch pricing is illegal in many states. A low-price, low-margin strategy, however, may stop competitors or drive them out of the market.

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What Are Factors Affecting Pricing Decisions?

external factors affecting pricing decisions

In setting prices, a company's short-term sales, market share, and profit goals may have to be tempered by broader societal considerations. This department reports to the marketing department or top management. The company stays in the business so long as the prices cover variable costs and some fixed costs. They have done this by capturing people imagination by being the first Hybrid car on the market and through the effective use of advertisement. Hotels located at tourist centres charge a higher tariff during peak season and charge less during off seasons. But it will not always charge the highest price for some reasons: to prevent the market from new entrants, to prevent government regulation, etc.

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Pricing Product, External & Internal Factors Affecting Pricing Decisions

external factors affecting pricing decisions

Virgin Atlantic Airways and British Airways were also involved in price fixing for their flights. The most important factor is the cost of production. Market Demand The laws of supply and demand should always come into play when setting your pricing. Competition A competitive pricing strategy, where prices for a product or service are set based primarily on the prices of the competition, is best suited for a price-sensitive and highly competitive market. Marketers need to work harder than ever to differentiate their offerings when a dozen competitors are selling virtually the same product at a comparable or lower price. Pricing will be strategically set in order for the organization to be profitable, while still ensuring that they are able to compete in the marketplace.

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What are the Factors Influencing Pricing Decisions in a Market?

external factors affecting pricing decisions

However, cost differences, market conditions, and competitive pricing by other suppliers can justify price differences in some situations. Usually, price fixing involves setting high prices so consumers must pay a high price regardless of where they purchase a good or service. Many firms support such price-positioning strategies with a technique called target costing, a potent strategic weapon. And because we created a product to ease the ladies work around the house, we do have an offer focused on women. Understanding these factors requires the marketer conduct research to monitor what is happening in each market the organization serves since the effect of these factors can vary by market.

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Factors Affecting Pricing Decision

external factors affecting pricing decisions

There are three situations that arise under it: a. Different groups of users affect pricing decision: The service provider may charge discriminatory price for the services offered by him. There has been a remarkable change in the nature of services offered by the banks. Other companies deemphasize price and use other marketing mix tools to create nonprice positions. Other elements of marketing mix also affect the pricing decision. A loss leader is a product that is sold below cost as an incentive for consumers to purchase other products at normal prices. We consider that rather than setting a high initial price to skim off small but profitable market segments, we want set a low initial price in order to penetrate the market quickly and deeply—to quickly attract a large number of buyers and win a large market share.

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Pricing Product, External & Internal Factors Affecting Pricing Decisions

external factors affecting pricing decisions

Finally, social concerns may have to be taken into account. Others who have an influence on pricing include sales managers, production managers, finance managers, and accountants. These policies effect international transactions which in turn effect economic strength. If price and profits rise, new sellers can easily enter the market. They should identify fixed and variable costs involved in provision of services.

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