The product life cycle through which the product is passing through, or the kind of sale lease versus overnight purchase, or liberal returns policy may be followed. Example of monopolistic competition is water service which supplier of water has no substitutes. In some cases, new laws can be directed at controlling your marketing efforts directly. Pricing on the basis of cost is not a relatively simple procedure, especially in the absence of information on what customer might be willing to pay but suggest fairness and reasonableness. For example, if a company keeps prices below the market price with the intention of earning a huge profit in the short run, it must bear in mind the fact that the competitors, too, may resort to price cutting. Services such as money transfers and personal online payments are offered at varying prices. Brand image and reputation of the company are also added in the value of product.
Car sellers may offer car insurance for the first year for example. Hotels located at tourist centres charge a higher tariff during peak season and charge less during off seasons. The simple rule is that the business charges such price that should not only cover all of the costs incurred in manufacturing, distribution and promotion of the product or service, but also provide a fair return on the invested money. It has nothing to do with buying paper towels or having a cup of coffee with buying an anniversary present or a home. Businesses large and small are affected not only by their own internal factors, but also by environmental factors over which they have little if any control. Its skimming Price Policy is supported by a large number of patents, to its launch of fuel injection and anti-lock brake systems.
Thus, a firm can charge higher profits in case of inelastic demand. Revenue Maximization: With less focus on profits, a company may focus on increasing revenues in order to increase market share and lower costs in the long term. Over-all price strategy is dealt with by top executives. Profit maximization objectives should be long term and not focus only on the short term. So, price is set at a level at which there is the desired impact on the product demand. Changing laws affect all aspects of business, marketing included.
It is difficult for new seller to enter in the market. Their nature and behaviour for the purchase of a particular product, brand or service etc. Product Quality : Quality affects price level. Manager, who is responsible to set price and formulae pricing policies and strategies, is required to know adequately about these factors. Example include lowering of price to avoid increasing competition, keep prices competitive to make market stable and avoid government intervention, to increase demand by lowering prices etc.
But no immediate or huge cut in price has been resorted to because the manufacturers know that their competitors may match any reduction in price. Therefore, pricing decision is taken accordingly. The organization matches the prices with the competitors and adjusts the prices more or less than the competitors. In the case of oligopoly, there are few sellers and market entry barriers are high, such as auto industry, computer processor industry, mainframe computer, and steel industry etc. With regard to the latter, there is a curious phenomenon. Some of these pricing strategies are the following. Image: Factors affecting pricing decisions 1.
Variable costs refer to the costs which are directly related to the levels of production or sales. A firm can determine the expected price in a few test-markets by trying different prices in different markets and comparing the results with a controlled market in which price is not altered. Price Elasticity of Demand: Refers to change in demand of a product due to change in price. In the international business, globalization is one of factors strongly affect to Fsoft. Morello is a professional writer and adjunct professor of travel and tourism.
Factors are also classified in terms of competition-related factors, market-related factors, product- related factors, and so forth. Moral values restrict managerial behaviour. Where services offering are homogeneous, even a slightest reduction in prices can attract more number of customers. Marketing Mix — Pricing A boosted job also called premium job will be shown ahead of all other similar basic jobs in the job search. The theory is, the higher the product differentiation, the more will be freedom to set the price, and the higher the price will be. There are a perfect knowledge of market condition and the price which no individual firm has any influence on the market price.