Environmental Influences on Pricing Decision

2140 Words Jan 27th, 2018 9 Pages
In term of Pricing we will look at 4 important environmental influences:
 Customers
 Competition
 Economy
 Government
Customers play a vital role in the pricing decision. Marketers should focus on how the customers will respond. They should consider how a buyer perceives a product i.e. does the product offers value, amount of buyers both current and potential and how sensitive buyers are to the change in price. Even though gathering data on the size of the market is important, companies must try to determine, how price sensitive customers are. Would a customer purchase a product given the price or will they assume that value is not equal to the cost and choose an alternative product or simply do without the product or service. (Raymond)
When setting or changing the price of a product, a company should acknowledge that the competition will react. The following are some of the factors that should be considered: (J. Paul Peter)
 Number of competitors
 Size of competitors
 Strength and weakness of each competitions
 Likely entry of new firms into the industry
 Degree of vertical integration of competitors
 Number of products sold by competitors
 Cost structure of competitors
 Historical reaction of competitors to price change.
The above factors help determine where the firm…