Pricing

1.0

1.1

PRICING DECISIONS

Introduction

Price can be defined as a measure of value exchanged by the buyer for the value offered by the seller. As

such, it may be expected that the price should reflect the costs to the seller of producing the product and

the benefit to the buyer of consuming it. It can be the value placed on a good or a service by customers at

one point in time, a measure of what must be exchanged in order to obtain a particular good, or what

consumers pay for a product.

The Procedure in Price Setting Policy

i)

Selecting a price objective – What a company wants to accomplish with its products offer. This

could include:



Profit objectives – maximize its profits, target return



Sales objectives – growth in sales, growth in market share, maintain share of the market



Competitive objectives – meet the level of competition



Price leadership especially for large firms who are leaders in the various industries

ii)

Estimate the demand curve – probable quantities a product will sell at a given prices

iii)

Estimate the cost curve which varies at different levels of accumulated production, experience

and for differentiated market offers.

iv)

Examine the competitors, costs, prices and even offers

v)

Select one of the following policies:





Company’s pricing policy



1.2.1

Influence of other marketing mix elements on price



1.2

Psychological pricing

Impact of price on other parties.

Factors affecting Pricing Decisions

Internal Factors

i)

Marketing objectives e. g. survival, profit-maximization and market leadership objectives

ii)

Marketing mix strategy e. g product, price, place and promotion used by each company

iii)

Cost of production within the organization and at different levels of production

1.2.2

External Factors

i)

the type of market and its characteristics

ii)

product’s demand in the market, low or high

iii)

consumer’s perception of price and value (psychological)

iv)

competitors’ costs, prices and offers...