Environmental Influences on Pricing Decision

Designing an appropriate pricing strategy is always a challenging task for most corporations, because price is a determinative factor of operating profits. Meanwhile, price can affect customer perceptions and product development. According to the basic economic theory, pricing policy should reflect the product’s costs and the relationship between supply and demand. In addition to the fundamental framework, price settle mechanism should take into consideration the underlying industry environment. For example, pricing in manufacturing is heavily cost-based with the certainty that the costs are fully covered. And conversely, in some particular sectors, there are downsides when price setting relies solely on the variable costs because of the high fixed cost. Based on this judgment, product providers should carry different pricing mechanism under different market conditions. Accordingly, pricing evolves from a purely academic topic related to the economic theories to a profits-maximising instrument involved with marketing practices. All these issues make the price setting problem more

Price: Pricing decisions should take into account profit margins and probable pricing response of competitors.

Pricing is important when marketing a product. The determining factor for the pricing is the material, time to make, amount spent on marketing and promotion of the product. The goal in providing such a product that is moderately

Cost-plus pricing lead to a complicated pricing structures, since distributors and customers negotiated separate product prices from manufacturers, introduced incentives, let prices vary from customer to customer, covered some products by contract and some don’t etc.

Firms may also have other objectives and considerations. For example, increasing price to maximize profits in the short run could encourage more firms to enter the market; therefore firms may decide to make less than maximum profits and pursue a higher market share.

Pricing is the most important aspect of the marketing mix. Price is the only element of the marketing mix, which produces a turnover for the organization. Pricing plays a crucial role in the product consumption. Pricing products too high or low results in loss of sales for the company. The pricing of each organization based on its corporative objective.

The setting of ‘fair’ prices to consumers: the company should bear in mind that customers nowadays will shop around to compare the intended products and services. However for the business survival and growth purposes, the company should also maintain its profit margins to ensure its business growth and expansion. The company needs to consider its cost factors and business operation areas to reduce or minimise the costing areas.

Potential or existing customers can consider product prices high, low or fair, thereby regulating the active demand for the products of the company.

When trying to determine the correct price, a number of factors must be considered: the market and its segments, the size of each segment, the ability to reach each segment, what distribution channels to target, whether to vary price by segment, the usefulness of promotional offerings, and whether the goal is to skim or penetrate each market.

Internal factors are establishing prices and marketers ought to take into consideration the importance and significance of a number of factors which is the outcome of the organizations choices, results, and actions. These factors are manageable by the organization and they may be modified, if need be. In spite of this, making a swift transformation is not always the answer or the quick fix. For example, product pricing is determined or influenced by the productivity of an industrial facility. The salesperson realizes that rising productivity can decrease of expense of manufacturing every product and therefore lets the salesperson to possibly reduce the price. External factors are not managed by the organization but then again it will influence the choices of pricing. Being able to better comprehend these factors would entail the marketer conduct research to observe and evaluate everything that is going on in all of the markets that the organization works for because of the influences of these factors can differ within the market (Factors Affecting Pricing Decision, 2016). External forces that can impact the organization are unmanageable because the organization does not manage them however, the organization can still take action and adjust to their occurrences and effects with the organizations manageable blend of components from the organizations internal setting. The unmanageable influences in the external setting are rivalry, governmental policies and plan, natural influences, social and cultural influences, demographic determinants, and changes within technology (Bright,

Pricing strategy, a very critical component of the marketing mix. Price is usually an important factor affecting the success of the transaction, but also the most difficult to determine the marketing mix of factors. The goal of enterprise pricing is to promote sales and profit. This requires enterprises to consider both the cost of compensation, but also to consider the ability of consumers to accept the price, so that the pricing strategy has a bidirectional decision-making characteristics of buyers and sellers. In addition,

Quite often, consumers purchase goods and services based on their perceived need. Upon making the decision that a need is present and a solution is available consumers are more equipped to react to that need. Although previously perceived that consumers will normally accept prices as presented by suppliers that remains to not be the case. Consumers assess and process prices based on past purchases and other psychological process they went through previously such as persuasive marketing strategies, accessibility of the goods or services and possibly information gathered from prior purchasers of a product. There are countless options that are available to consumers. Consumers are then faced with the choice of choosing the product that best fulfills their need at that given point. Consumers who are knowledgeable regarding prices will be aware of the approximated price for products (Zhao, Zhao & Deng, 2015).

Keeping these realities in mind, it is very much obvious that for this market, we choose and follow a value based pricing and do not keep the price of the product too high. It is advisable rather to follow an average pricing and let the consumers build some enthusiasm around the product.

Price interacts with all other elements of the marketing mix to determine the effectiveness of each and of the whole. The objectives that guide pricing strategy should be a subset of the objectives that guide overall marketing strategy. Thus, it is probably wrong to view price as an independent element of marketing strategy or to assert that price, by itself, is a central element in the marketing mix.” (Webster, 1979)

Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).