Moreover, the pricing decision is a means to an end, and not the end in itself, so that decisions about price must be considered in the context of overall business objectives. External factors that affect pricing decisions essay 303 words. The marketers should set the prices as per the organizational goals. Pricing decisions are affected by federal and state regulations. Pdf an examination of factors that affect pricing decisions. Pricing strategy is a science that requires you to consider many factors if you want to maximize your profits. An examination of factors that affect pricing decisions. Understand the factors that affect a firms pricing decisions. Request pdf factors influencing pricing decisions in this paper, we look at factors that affect how marketers set price. Introduction pricing is simply the money charged for a product or service.
As we shall see, price is a strategic as well as an operational variable, so that pricing decisions can have a profound effect on future as well as present performance. It is everything that a customer has to give up in order to acquire a product or service. Factors to consider when setting prices mba knowledge base. Factors that affect price in any market and pricing. Differences in quality standards influence pricing decision. Keep the following things in mind when you work with your controller services to set your own pricing strategy. The first factor is monitoring the differences at national level. Pricing is considered as part of 4ps of marketing mix. Pricing decisions are decisions faced by top management and marketing managers. Pricing is often one of the most difficult things to get right in business. Pricing is a fundamental aspect of financial modeling and is one of the four p. Pricing factors to consider when setting price business.
Stages of new product development product life cycle macroeconomics articles. Dec 05, 2015 price is not determined by a simple step rather there are many factors affecting pricing decisions. In determining a pricing policy, a company should not only consider the immediate effect of prices, but also give due weight to the reaction of competitors. Setting prices that are too high can prevent customers from buying your products. Differences in services rendered influence pricing decision. Factors influencing pricing decisions in selected banks in the banking industry in nairobi, kenya.
For instance, an organization has set a goal to produce quality products, thus, the prices will be set according to the quality of products. The relative market shares or market strength of competitors influences whether a business can set prices independently, or whether it has to. If a product is priced higher, the instinctive judgement. Other external factors some other external factors can affect setting the price such as. Factors that affect pricing strategies for international jgbm. Economists and financial analysts have therefore invested a tremendous amount of energy and effort in an attempt to explain what determines residential sale and rental prices gilderbloom, 1985. Customers use price as an indicator of quality particularly for products where objective measurement of quality is not possible, such as drinks and perfumes. Factors affecting pricing decisions business study notes. At least, the bundle of factors that determine rent can be broadly classified into economic and noneconomic factors. Chapter 3 factors that affect transportation cost and. This paper is an attempt to analyze the consumer buying behaviour of durables, to examine the factors inducing the consumer buying behaviour and. An enormous number of factors affect pricing decisions. How much to charge for a product or service depends on a multitude of factors such as competition, cost, advertising, and sales promotion.
Regulations are designed to protect consumers, promote competition, and encourage ethical and fair behavior by businesses. Understanding these factors requires the marketer conduct research to monitor what is happening in each market the company serves since the effect of these. Pdf pricing strategy has played an important role in consumer purchasing behavior and decision making process richard, 1985. There are several factors a business needs to consider in setting a price.
Jun 16, 20 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. The international marketing environmental factors that. Reaction of competitors influence pricing decision. Pricing factors are manufacturing costs, market place, competition, market condition, and quality of product.
Main factors affecting price determination of product are. Factors influencing pricing decisions management study hq. Pdf an examination of factors that affect pricing decisions for. If price is lowered, for example, then sales is most likely to increase. For international markets, pricing is one of the most important elements of marketing product mix, generates cash and determines a companys survival yaprak, 2001. Factors that affect price in any market and pricing decision this paper has divided the factors, which affect pricing and piecing decisions into two main categories, both categories are explain in detail below. Factors that affect pricing strategies for international. As for internal factors are concerned, please refer to this article. Unfortunately, this book cant be printed from the openbook. The company must also consider what impact its prices will have on other parties in its environment. Factors determining residential rental prices ivy drafor. When smes develop their pricing strategies, they need to be aware of factors that can.
Those factors include the offerings costs, the demand, the customers whose needs it is designed to meet, the external environmentsuch as the competition, the economy, and government regulationsand other aspects of the marketing mix, such as the nature of the. This paper examines factors that affect pricing decision for export markets, and sheds light on international pricing strategies in a global competitive market. Obviously, cost needs to be one of your first considerations when making pricing decisions. Economic theory suggests that the best price for a product or service is the one that maximizes the difference between total revenue and total costs. Pricing product, external and internal factors affecting.
For example, the robinsonpatman act limits a sellers ability to charge different customers different prices for. Another factor affecting the companys pricing structure is competitors cost and pricing. For example, in the fall of 1996, florida tomato growers concerned about cheap tomatoes from mexico persuaded the u. Jones and asghar zarkoohi for their insightful comments on earlier versions of this paper. Pricing decisions global marketing chapter 11 how to set price the global manager must develop systems and policies that address price floor. For international markets, pricing is one of the most. There are several important factors that influence decision making. Pricing decision of an organization is affected by various internal and external factors. Basically two factors, which affect the company price decision and strategy. One of the key elements of a product, which enters in to a new market, is its price. This paper builds on previous theoretical and empirical studies to determine the extent to which contextual factors impact the strategic decision making processes. From the spss findings and analysis, firm cost structure p value 0. Factors that affect pricing decisions 2012 book archive.
Therefore, a marketer should adopt a well planned approach for pricing decisions. Some factors are internal to organisation and, hence, controllable while other factors are external or environmental and are uncontrollable. It should call for an effective market intelligence of the competitors pricing decision. A pricing policy is a standing answer to recurring question. Price strongly influences quality perceptions of such products.
Therefore, a marketer should adopt a wellplanned approach for pricing decisions. Price is the only element of marketing mix that helps in generating income. Factors influencing pricing strategies adopted by large. Internal factors when setting price, marketers need to take into consideration several factors, which are the result of company choices and actions. Factors that influence consumer purchasing decisions of.
Factors influencing pricing strategy your business. External factors that affect pricing decisions essay 303. An examination of factors that affect pricing decisions for. Factors influencing pricing decisions request pdf researchgate. Factors influencing pricing decisions in selected banks in. Price is not determined by a simple step rather there are many factors affecting pricing decisions. The marketer should know the factors that influence the pricing decisions before setting the price of a product. Factors affecting pricing as noted, the main reason for entering different markets is to increase the income and profitability.
The international marketing environmental factors that affect global companies in their international marketing decisions published on may 10, 2016 may 10, 2016 40 likes 3 comments. However, scholars have not paid enough attention to international and export pricing kotabe and aulak, 1993. Understand why companies must conduct research before setting prices in international markets. Pricing is also a key variable in microeconomic price allocation theory. The study proved brand and brand related factors are not significant factors that influence purchase intention. This means that the management of the business should take into account the change in the price and offering of the competitors and take steps accordingly. Pricing strategy has played an important role in consumer purchasing behavior and decision making process richard, 1985. Factors influencing price decisions and determination in business. Your product or service prices impact your profitability as well as the perception of your brand in the marketplace.
Factors influencing pricing decisions price quality relationship. What considerations enter into the pricing decision. One factor is the price floor, which can be linked to product cost or some other consideration. If consumer perception of quality and price match their. Factors affecting price decisions linkedin slideshare. The final price for a product may be influenced by many factors which can be categorized into two main groups. A firm also has to look at a myriad of other factors before setting its prices. Internal factors when setting price, marketers need to take into consideration several factors, which are the result of company choices. A customer always compares the companys prices with those of its competitors. A companys price level sends signals about the quality of its products to the customer. Sep 23, 2010 economic factors such as boom or recession, inflation, and interest rates affect pricing decisions because they affect both the cost of producing a product and consumer perception of the products price and value. Factors affecting the pricing decisions economics discussion. Internal and external factors on firms transfer pricing decisions. Factors affecting pricing decisions for the remainder of this tutorial, we look at factors affecting pricing decisions and how marketers set price.
Pricing decision analysis the setting of a price for a product is one of the most important decisions and certainly one of the more complex. What should you consider when making pricing decisions. Key factors influencing pricing strategies for small. What are the basic factors that affect price in any market. Factors influencing purchase intention of starbucks page 2 of 142 cultivated around the world in more than 60 countries and is the worlds second most valuable traded commodity behind crude oil international coffee organization, n. Internal and external factors on firms transfer pricing. Factors influencing strategic decisionmaking processes. Buek, rehak, tvrdon 2010 state that foreign investors follow several factors while choosing new location. This project focused on the study of the factors inf1uencing pricing decisions in selected banks in nairobi in kenya. Economic factors like inflation deflation and interest rate affect selling price because they affect cost of production and consumer perceptions related product. Some of the major factors influencing pricing decisions of a company are as follows.
Figure2 shows the factors that affect the pricing decisions. However, for food products, price quality relationship is the most important factor. A change in price not only directly affects revenue but has major consequences on other decisions. Factors influencing purchase intention of starbucks. What are the factors influencing pricing decisions in a market. The final price for a product might be influenced by numerous factors. A systematic approach to pricing requires the decision that an individual pricing situation be generalised and codified into a policy coverage of all the principal pricing problems. Significant factors include past experiences, a variety of cognitive biases, an escalation of commitment and sunk outcomes, individual differences, including age and socioeconomic status, and a belief in personal relevance. The competitors also keep an eye on the price levels of a company. Following are the two main factors that affect pricing decisions. For example, the robinsonpatman act limits a sellers ability to charge different customers different prices for the same products.
Internal factors affecting pricing decision to know a list of factors affecting pricing decisions. The reason is that the price is a very sensitive issue for the customers in their purchasing behavior. If you need to print pages from this book, we recommend downloading it as a pdf. Nine factors to consider when determining your price.
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