CHAPTER 6
PRICING
Price: In economics and business, the price is the assigned numerical monetary value of a good, service or asset. The concept of price is central to micro economics where it is one of the most important variables in resource allocation theory (also called price theory). Price is also central to marketing where it is one of the four variables in the marketing mix that business people use to develop a marketing plan.
Price may be defined as the value of product attributes expressed in monetary terms which a consumer pays or is expected to pay in exchange and anticipation of the expected or offered utility. Price is therefore, a link that binds consumers and the company. It helps to establish a mutually advantageous economic relationship and facilitates the transfer of ownership of goods and services from the company to buyers.
FACTORS AFFECTING PRICING DECISIONS
Before a firm develops the pricing strategy, it should take into consideration the different factors which affect price decisions. These factors are external as well as internal. External considerations should be studied before enacting a pricing strategy. Fig Pr-1
Pricing forces
Demand
Competition
Consumer's quality perceptions
Middlemen (distributors), etc.
Suppliers
Government
Economic conditions
Ethical considerations
Cost of raw materials
Organization
Objectives
- Mkt. Share
- Mkt. skimming
- Target return on investment
- Meet competition
Market penetration
Cost
Pricing Objective(s)
Image
Product differentiation
Marketing Mix
E xternal considerations * Internal considerations
Fig PR - I pricing objectives and pricing forces.
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