Accounting technicians scheme west africa
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- C.7.4 Factors which influence pricing
- Variable costs
| Psychological Pricing: This is design to encourage purchases that are based on emotional reaction rather than rational responses. It is away of appealing to the psychology of the buyer in order to motivate him to make purchase. For example placing a price of N does not make the customer to think of paying N but in effect will be paying Nb 247 C.7.4 Factors which influence pricing Organisations take the following factors into consideration when setting prices - ii Cost of Production: This is one of the overriding influences on pricing. In some industries, it is the most important factor, which determines the price of a product. ▪ Variable costs are costs which are directly linked with the volume of production. These are cost that will exist if production is made and they could be discontinued when production stops example are cost of raw materials, labour, haulage, or carriage, shipping cost etc. ▪ Fixed costs on the other hand are costs that are incurred by the organization whether they produce any product or not Some fixed cost are called Specific program cost- cost that are incurred to carryout a specific project like opening anew office or warehouse, special advertising campaign and promotion . Another type of fixed costs is costs that are incurred across board in the organization for example administrative expenses, salaries, deprecation, rents, communication, etc. iii Margin Paid to distributors: The margin an organisation offers to wholesalers and retailers usually influence the price it sets for the product. iii) Competitors: The activities and price strategies of rivals influence the price policy of an organisation. Most organisations anticipate the reaction of competitors before they set or change their price structure. iv) Nature of Demand: The success of the pricing policy of an organisation depends on the responsiveness of demand of consumers to prices i.e. the elasticity of demand for the product. vi Legal Constraints: This refers to government legislation and regulation to check the exploitative tendies of marketers. Example is the price of petrol at filling station set at N per liter anywhere in the country vii Company Objective and Marketing Goal: if man a company’s goal is to serve the masses and middle market and enjoy large market share, price must usually be competitive in such away that it will attract large scale volume of turnover instead of receives a high profit margin on each unit sold. On the other hand if company objective is to serve prestige segment of the market, marketing objective will emphasis high quality and price to cover cost. Download 3.37 Mb. Share with your friends:
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