{"id":1045,"date":"2022-04-21T20:28:00","date_gmt":"2022-04-21T18:28:00","guid":{"rendered":"https:\/\/support.centreforelites.com\/price-and-pricing-decisions\/"},"modified":"2023-08-16T13:03:08","modified_gmt":"2023-08-16T11:03:08","slug":"price-and-pricing-decisions","status":"publish","type":"post","link":"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/","title":{"rendered":"Price and Pricing Decisions"},"content":{"rendered":"<p>In this article, we shall be covering the role of price and pricing decision in the marketing mix, for instance, what price is, how it can be used, and how it is set relative to such factors as&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">product<\/a>&nbsp;costs,&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">market<\/a>&nbsp;demand, and competitors\u2019 prices. In particular, we will examine three major pricing decision problems facing sellers. These involve how to: (a) set prices for the first time, (b) modify a product\u2019s price over time and space to meet varying circumstances and opportunities, and (c) initiate and respond to price.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-4-3 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"Pricing Decision\" width=\"500\" height=\"375\" src=\"https:\/\/www.youtube.com\/embed\/lPF_LfhvrXk?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><figcaption class=\"wp-element-caption\">Price and <a href=\"https:\/\/support.centreforelites.com\/ru\/external-factors-affecting-pricing-decisions\/\">Pricing Decisions<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69de30d0d43ac\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewbox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewbox=\"0 0 24 24\" version=\"1.2\" baseprofile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69de30d0d43ac\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#THE_MEANING_AND_IMPORTANCE_OF_PRICE\" >THE MEANING AND IMPORTANCE OF PRICE<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#IMPORTANCE_OF_PRICE_TO_THE_ECONOMY\" >IMPORTANCE OF PRICE TO THE ECONOMY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#IMPORTANCE_OF_PRICE_TO_THE_INDIVIDUAL_FIRM\" >IMPORTANCE OF PRICE TO THE INDIVIDUAL FIRM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#_IMPORTANCE_OF_PRICE_IN_THE_CONSUMERS_MIND\" >&nbsp;&nbsp;IMPORTANCE OF PRICE IN THE CONSUMER\u2019S MIND&nbsp;<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#THE_ROLE_OF_PRICE_IN_THE_MARKETING_MIX\" >THE ROLE OF PRICE IN THE MARKETING MIX<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#FACTORS_TO_CONSIDER_WHEN_SETTING_PRICES\" >FACTORS TO CONSIDER WHEN SETTING PRICES&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#INTERNAL_FACTORS_AFFECTING_PRICE_AND_PRICING_DECISIONS\" >INTERNAL FACTORS AFFECTING PRICE AND PRICING DECISIONS\u00a0<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#MARKETING_OBJECTIVES\" >MARKETING OBJECTIVES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#MARKETING-MIX_STRATEGY\" >MARKETING-MIX STRATEGY<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#COSTS\" >COSTS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/support.centreforelites.com\/ru\/price-and-pricing-decisions\/#ORGANISATIONAL_CONSIDERATION\" >ORGANISATIONAL CONSIDERATION<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"THE_MEANING_AND_IMPORTANCE_OF_PRICE\"><\/span>THE MEANING AND IMPORTANCE OF PRICE<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Price is the amount of money and\/or other items with utility needed to acquire a&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">product<\/a>&nbsp;(utility is an attribute that has the potential to satisfy wants). In this instance, therefore, price may involve more than money. Note that exchanging goods and\/or services for other products in termed barter.<\/p>\n\n\n\n<p>Prices can take on a number of assumed names as indicated in Table 1 below:<\/p>\n\n\n\n<p>Table: Other Names Assumed By Price<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Assumed name<\/strong><\/td><td><strong>Where applied or operational<\/strong><\/td><\/tr><tr><td>Tuition<\/td><td>Education<\/td><\/tr><tr><td>Interest<\/td><td>Use of money<\/td><\/tr><tr><td>Rent<\/td><td>Use of living quarters, or a piece of equipment for a&nbsp;period of time.<\/td><\/tr><tr><td>Fare<\/td><td>Taxi ride or airline flight<\/td><\/tr><tr><td>Fee<\/td><td>Services for a physician or lawyer<\/td><\/tr><tr><td>Retainer<\/td><td>Lawyer\u2019s or Doctor\u2019sServices over a period of time<\/td><\/tr><tr><td>Toll<\/td><td>Travel on some high-ways<\/td><\/tr><tr><td>Salary<\/td><td>Services of an executive or other white-collar work<\/td><\/tr><tr><td>Wage<\/td><td>Services of blue-collar worker<\/td><\/tr><tr><td>Commission<\/td><td>Sales person\u2019s services<\/td><\/tr><tr><td>Dues<\/td><td>Membership in a union or a club<\/td><\/tr><tr><td>Premium<\/td><td>Services of insurance companies<\/td><\/tr><tr><td>Rate<\/td><td>Services of utilities<\/td><\/tr><tr><td>Honorarium<\/td><td>Service given by professionals.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>From the various assumed price names in the above table, you can see that price is significant to an&nbsp;economy, to an individual firm and in the mind of the consumer. We shall briefly examine&nbsp;each of these situations.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"IMPORTANCE_OF_PRICE_TO_THE_ECONOMY\"><\/span>IMPORTANCE OF PRICE TO THE ECONOMY<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A product price influences wages, rent, interests, and profits. This means that a product\u2019s price influences the amounts paid for the factors of production, such as land, capital, and entrepreneurship. We can therefore say that price is a basic regulator of the economic system since it influences the allocation of the factors of production. For instance, high wages attract labour, high-interest rates attract capital etc. As an allocator of resources,&nbsp;price determines what will be produced (i.e. supply), as well as who will get the goods and&nbsp;services produced (i.e. demand).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"IMPORTANCE_OF_PRICE_TO_THE_INDIVIDUAL_FIRM\"><\/span>IMPORTANCE OF PRICE TO THE INDIVIDUAL FIRM<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The&nbsp;product\u2019s price is a major determinant of the&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">market<\/a>&nbsp;demand for it. Hence price affects a firm\u2019s competitive position and its&nbsp;market share. Consequently, the price has a considerable bearing on a company\u2019s revenues&nbsp;and net profits. For example, it is through prices that money comes into an organization.<\/p>\n\n\n\n<p>However, several factors can limit how much effect pricing has on a company\u2019s marketing programme. For instance, factors such as differentiated product features, a favourable brand, high quality, convenience, or some combination of these may be more important to consumers than price.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"_IMPORTANCE_OF_PRICE_IN_THE_CONSUMERS_MIND\"><\/span><strong>&nbsp;&nbsp;<\/strong><strong>IMPORTANCE OF PRICE IN THE CONSUMER\u2019S MIND&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In&nbsp;some cases, some consumers\u2019 perceptions of product quality have a direct relationship with price. Hence, the higher the price, the better the quality is perceived to be. In actual fact, a lot of people hold this view, especial y when they are economical y okay. This is the reason why some shoppers make price-quality judgments particularly when they lack other information about product quality. In addition, consumers\u2019 quality perceptions can also be influenced by such factors as store&nbsp;reputation and advertising.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"THE_ROLE_OF_PRICE_IN_THE_MARKETING_MIX\"><\/span>THE ROLE OF PRICE IN THE MARKETING MIX<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Price is the only element in the marketing mix that produces revenue. All&nbsp;other elements-product, promotion, and distribution are concerned with delivering&nbsp;value to the customer, and by so doing, they represent costs. Price is also one of the most flexible <a href=\"https:\/\/support.centreforelites.com\/ru\/elements-compounds-and-mixtures\/\">elements<\/a> in the marketing mix. Unlike product features and channel commitments, the price can be adjusted quickly. At the same time, pricing and price competition is the number one problem facing many firms. Observations have shown that many firms do not handle pricing well enough. The most common mistakes&nbsp;include:<\/p>\n\n\n\n<p>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pricing that is too cost oriented;<\/p>\n\n\n\n<p>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prices that are not revised often enough to reflect market changes;<\/p>\n\n\n\n<p>(iii)&nbsp;&nbsp;&nbsp;&nbsp;Pricing that does not take the rest of the marketing mix into account; and<\/p>\n\n\n\n<p>(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prices that are not varied enough for different products, market segments, and&nbsp;purchase occasions.<\/p>\n\n\n\n<p>We shall be looking at the factors that must be considered when setting prices and at general pricing approaches.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FACTORS_TO_CONSIDER_WHEN_SETTING_PRICES\"><\/span><strong>FACTORS TO CONSIDER WHEN SETTING PRICES&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A&nbsp;company\u2019s <a href=\"https:\/\/support.centreforelites.com\/ru\/external-factors-affecting-pricing-decisions\/\">pricing decisions<\/a> are affected both by internal company factors and&nbsp;external environmental factors. This is illustrated by&nbsp;figure 11.1<\/p>\n\n\n\n<p>Figure 11.1: Factors Affecting Price Decisions<\/p>\n\n\n\n<p><strong><u>Internal factors:<\/u><\/strong><strong>&nbsp;<\/strong>Marketing objectives Marketing mix&nbsp;<a href=\"https:\/\/motivemeaning.com\/6-major-types-of-strategy-in-business-management\/\">strategy<\/a>&nbsp;Costs<\/p>\n\n\n\n<p>Organizational<\/p>\n\n\n\n<p>Considerations<\/p>\n\n\n\n<p><strong>External factors<\/strong><\/p>\n\n\n\n<p>Nature of the Market and&nbsp;<strong>demand&nbsp;<\/strong>Competition<\/p>\n\n\n\n<p>Other environmental factors (e.g. economy re-sellers,&nbsp;government)<\/p>\n\n\n\n<p>Pricing<\/p>\n\n\n\n<p>Decisions<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"INTERNAL_FACTORS_AFFECTING_PRICE_AND_PRICING_DECISIONS\"><\/span><strong>INTERNAL FACTORS AFFECTING PRICE AND PRICING DECISIONS\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As already shown in Figure 11.1, the internal factors affecting pricing include the company\u2019s marketing&nbsp;objectives, marketing-mix&nbsp;<a href=\"https:\/\/motivemeaning.com\/6-major-types-of-strategy-in-business-management\/\">strategy<\/a>, costs, and organization. Let us examine each of these.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"MARKETING_OBJECTIVES\"><\/span>MARKETING OBJECTIVES<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<figure class=\"wp-block-image size-full\"><img data-recalc-dims=\"1\" fetchpriority=\"high\" decoding=\"async\" width=\"1880\" height=\"1253\" src=\"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?resize=1880%2C1253&#038;ssl=1\" alt=\"Marketing Objectives and Price and Pricing Decisions\" class=\"wp-image-2043\" srcset=\"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?w=1880&amp;ssl=1 1880w, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?resize=300%2C200&amp;ssl=1 300w, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?resize=1024%2C682&amp;ssl=1 1024w, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?resize=768%2C512&amp;ssl=1 768w, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?resize=1536%2C1024&amp;ssl=1 1536w, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-262470.jpeg?resize=18%2C12&amp;ssl=1 18w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/><figcaption class=\"wp-element-caption\">Marketing Objectives for Price and <a href=\"https:\/\/support.centreforelites.com\/ru\/external-factors-affecting-pricing-decisions\/\">Pricing Decisions<\/a> <\/figcaption><\/figure>\n\n\n\n<p>The first thing to be done by a company is to decide what it wants to accomplish with the particular product. For instance, if the company has selected its <a href=\"https:\/\/support.centreforelites.com\/ru\/target-market-strategies\/\">target market<\/a> and market&nbsp;positioning carefully, then its marketing-mix&nbsp;<a href=\"https:\/\/motivemeaning.com\/6-major-types-of-strategy-in-business-management\/\">strategy<\/a>, including price, will be somehow&nbsp;straightforward. For example, if the Nigerian Bottling Company wants to produce a special&nbsp;fruit drink for the affluent-customer segment, this implies charging a high price.<\/p>\n\n\n\n<p>In this instance, pricing&nbsp;<a href=\"https:\/\/motivemeaning.com\/6-major-types-of-strategy-in-business-management\/\">strategy<\/a>&nbsp;is largely determined by the prior decision on market&nbsp;positioning. The company may simultaneously seek additional objectives. The clearer these&nbsp;objectives are, the easier it is to set price. Each possible price will have a different impact&nbsp;on such objectives as profits, sales revenue, and market share. Examples of common&nbsp;objectives are survival, current profit maximization, market-share leadership, and product,&nbsp;quality leadership.<\/p>\n\n\n\n<p>Let us look at these objectives, one by one:<\/p>\n\n\n\n<p><strong>Survival: Firms set survival&nbsp;<\/strong>as their major objective if they are troubled by over-capacity,&nbsp;stiff competition, or changing tastes of consumers. For instance, in order to keep a factory&nbsp;going, a firm may set a low price, with the hope that demand will subsequently increase. Thus, profits are less important than survival. In as much as their prices cover variable&nbsp;costs and some fixed costs, the firm can stay in business. However, you should note that&nbsp;survival is only a short-term objective. The firm must learn how to add value in the long run, otherwise, it would close shop.<\/p>\n\n\n\n<p><strong>Current Profit Maximisation:&nbsp;<\/strong>Many firms use current profit maximisation&nbsp;as their pricing goal. What they usually do, is estimate what demand and costs will be at different prices and choose the prices that will produce themaximum current profit, cash flow, or return on investment. Thus, the firms are&nbsp;emphasizing current financial performance rather than long-run performance.<\/p>\n\n\n\n<p>Market-Share Leadership. Some other firms set market-share leadership as&nbsp;their objective. The belief here is that the firm with the largest market share will enjoy the lowest costs and highest long-run profit. Hence, in order to become the market-share leader, these firms set prices as low as possible. Product-Quality Leadership: A firm might adopt the objective of being the product-quality leader in the market. As should be expected, this normal y cal s for&nbsp;charging a high price to cover the high product quality and high cost of research&nbsp;and <a href=\"https:\/\/support.centreforelites.com\/ru\/definition-of-growth-and-development\/\">development<\/a> (R &amp; D).<\/p>\n\n\n\n<p>Firms might also use price to achieve other more specific objectives. For instance, a firm can set Prices low to prevent competition from entering the&nbsp;<a href=\"https:\/\/motivemeaning.com\/3-target-market-strategies\/\">markets<\/a>, or set prices at competitor\u2019s level in order to stabilize the market. In addition, prices can be set to keep the loyalty and support of re-sellers or to avoid government intervention. Prices can be reduced temporarily to create excitement&nbsp;for a product or to draw more customers into a retail store. Furthermore, one&nbsp;product may be priced to help the sales of other&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">products<\/a>&nbsp;in the firm\u2019s line. It is thus very clear that pricing plays an important role in helping to accomplish the firm\u2019s objectives at several levels.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"MARKETING-MIX_STRATEGY\"><\/span>MARKETING-MIX STRATEGY<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>You should realize that price is just one of the marketing-mix <a href=\"https:\/\/support.centreforelites.com\/ru\/elements-compounds-and-mixtures\/\">elements<\/a> that&nbsp;firms use to achieve their marketing objectives. Price decisions must be coordinated with the remaining three <a href=\"https:\/\/support.centreforelites.com\/ru\/elements-compounds-and-mixtures\/\">elements<\/a> to form a consistent and&nbsp;effective marketing programme. Decisions made for other marketing-mix variables may affect <a href=\"https:\/\/support.centreforelites.com\/ru\/external-factors-affecting-pricing-decisions\/\">pricing decisions<\/a>. For example, producers using many re\u00adsellers who are expected to support and promote their products may have to&nbsp;incorporate larger re-seller margins into their prices. In addition, the decision&nbsp;to position the product on high-performance quality will mean that the seller&nbsp;must charge a higher price to cover higher costs.<\/p>\n\n\n\n<p>It is common for firms to make their <a href=\"https:\/\/support.centreforelites.com\/ru\/external-factors-affecting-pricing-decisions\/\">pricing decisions<\/a> first and then base other marketing-mix decisions on the prices they want to charge. In this case, price&nbsp;is a crucial product positioning factor that defines the product\u2019s market, competition, and design. Therefore, the intended price determines what product features can be offered and what production costs incurred.<\/p>\n\n\n\n<p>Some firms often support such price-positioning strategies with a technique called&nbsp;<em>target costing<\/em>,&nbsp;which is a potent strategic weapon. What is done in target costing is to&nbsp;reverse the usual process of first designing a new product, determining its cost, and then arriving at an appropriate price. Instead, it starts with a target cost and works backward.<\/p>\n\n\n\n<p>Other firms may decide to de-emphasize price and use other marketing-mix tools to create&nbsp;non-price position. Often, the best&nbsp;<a href=\"https:\/\/motivemeaning.com\/6-major-types-of-strategy-in-business-management\/\">strategy<\/a>&nbsp;is not to charge the lowest price, but rather to&nbsp;differentiate the marketing offer to make it worth a higher price.<\/p>\n\n\n\n<p>Generally, the marketer needs to consider the total marketing mix when setting prices, for&nbsp;instance, if the&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">product<\/a>&nbsp;is positioned on non-price factors, then decisions about quality, promotion, and distribution will strongly affect the price. If it so happens that price is a crucial positioning factor, then price will strongly affect decisions made about the other marketing-mix <a href=\"https:\/\/support.centreforelites.com\/ru\/elements-compounds-and-mixtures\/\">elements<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"COSTS\"><\/span>COSTS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Costs basically set the floor for the price that the firm can charge for its&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">product<\/a>.&nbsp;Normally, a firm will want to charge a price that both covers all its costs for producing, distributing, and selling the&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">product<\/a>&nbsp;and delivers a fair rate of return for its efforts and risks. Hence, a firm\u2019s costs may be an important element in its pricing&nbsp;<a href=\"https:\/\/motivemeaning.com\/6-major-types-of-strategy-in-business-management\/\">strategy<\/a>. Usually, most firms&nbsp;struggle to become the \u201clow-cost producers\u201d in their industries. This is based on the&nbsp;fact that companies with lower costs can set lower prices, which then results in greater sales&nbsp;and profits.<\/p>\n\n\n\n<p>A firm\u2019s costs generally take two firms, fixed and variable. Fixed costs (or overhead) are costs that do not vary with production or sales levels. For example, a company must pay monthly bills for rent, interest, salaries, whatever the company\u2019s output.<\/p>\n\n\n\n<p>Variable cost varies directly with the level of production. These costs tend to be the same for each unit produced.<\/p>\n\n\n\n<p>Total costs are the sums of the fixed and variable costs for any given level of production. Usually, management wants to charge a price that will at least cover the total production costs at a given level of production. The firm needs to watch its costs carefully. For&nbsp;instance, if it costs the firm more than competitors to produce and sell its product, the&nbsp;firm will have to charge a higher price or make less profit, thus putting it at a competitive&nbsp;disadvantage.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"ORGANISATIONAL_CONSIDERATION\"><\/span>ORGANISATIONAL CONSIDERATION<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is the responsibility of a firm\u2019s management to decide who within the organization&nbsp;should set prices. Finns handle pricing in a variety of ways. In small companies, for example, prices often are set by top management rather than by the marketing or sales department. In larger companies, however, pricing is generally handled by divisional or&nbsp;<a href=\"https:\/\/www.blogger.com\/blog\/post\/edit\/3718099119877372482\/6329013044098584559#\" target=\"_blank\" rel=\"noreferrer noopener\">product<\/a>&nbsp;line managers. In the case of industrial markets, salespeople may be allowed to negotiate with customers within certain price ranges. Even then, top management sets the&nbsp;pricing objectives and policies, and it often approves the prices proposed by lower-level&nbsp;management or salespeople.<\/p>","protected":false},"excerpt":{"rendered":"<p>n this article, we shall be covering the role of price and pricing in the marketing mix, for instance, what price is, how it can be used, and how it is set relative to such factors as product costs, market demand, and competitors&#8217; prices. <\/p>","protected":false},"author":1,"featured_media":2041,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"wds_primary_category":135,"footnotes":""},"categories":[135],"tags":[178,227],"class_list":["post-1045","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fundamentals-of-marketing","tag-business-management","tag-principles-of-marketing"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-5709665.jpeg?fit=1880%2C1253&ssl=1","jetpack-related-posts":[{"id":1044,"url":"https:\/\/support.centreforelites.com\/ru\/external-factors-affecting-pricing-decisions\/","url_meta":{"origin":1045,"position":0},"title":"EXTERNAL FACTORS AFFECTING PRICING DECISIONS","author":"centreforelites","date":"21 \u0430\u043f\u0440\u0435\u043b\u044f, 2022","format":false,"excerpt":"Apart from factors within a company, external factors affecting pricing decisions in a firm also include the nature of the\u00a0market\u00a0and demand, competition, and other environmental elements.","rel":"","context":"\u0412 &quot;Fundamentals of Marketing&quot;","block_context":{"text":"Fundamentals of Marketing","link":"https:\/\/support.centreforelites.com\/ru\/category\/fundamentals-of-marketing\/"},"img":{"alt_text":"EXTERNAL FACTORS AFFECTING PRICING DECISIONS","src":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2023\/04\/EXTERNAL-FACTORS-AFFECTING-PRICING-DECISIONS-scaled.webp?fit=1200%2C750&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2023\/04\/EXTERNAL-FACTORS-AFFECTING-PRICING-DECISIONS-scaled.webp?fit=1200%2C750&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2023\/04\/EXTERNAL-FACTORS-AFFECTING-PRICING-DECISIONS-scaled.webp?fit=1200%2C750&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2023\/04\/EXTERNAL-FACTORS-AFFECTING-PRICING-DECISIONS-scaled.webp?fit=1200%2C750&ssl=1&resize=700%2C400 2x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2023\/04\/EXTERNAL-FACTORS-AFFECTING-PRICING-DECISIONS-scaled.webp?fit=1200%2C750&ssl=1&resize=1050%2C600 3x"},"classes":[]},{"id":1073,"url":"https:\/\/support.centreforelites.com\/ru\/4-characteristics-of-business-market-demand\/","url_meta":{"origin":1045,"position":1},"title":"4 CHARACTERISTICS OF BUSINESS MARKET DEMAND","author":"centreforelites","date":"10 \u0430\u043f\u0440\u0435\u043b\u044f, 2022","format":false,"excerpt":"Four demand characteristics differentiate the business market from the consumer market: (i) Demand is derived, (i ) demand tends to be inelastic, (i i) demand is widely fluctuating, and (iv) the market is well informed\u00a0DEMAND IS DERIVEDThe demand for a business product is derived from the demand for the consumer\u00a0products\u2026","rel":"","context":"\u0412 &quot;Blog&quot;","block_context":{"text":"Blog","link":"https:\/\/support.centreforelites.com\/ru\/category\/blog\/"},"img":{"alt_text":"4 CHARACTERISTICS OF BUSINESS MARKET DEMAND","src":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-16729455.jpeg?fit=1200%2C800&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-16729455.jpeg?fit=1200%2C800&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-16729455.jpeg?fit=1200%2C800&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-16729455.jpeg?fit=1200%2C800&ssl=1&resize=700%2C400 2x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/pexels-photo-16729455.jpeg?fit=1200%2C800&ssl=1&resize=1050%2C600 3x"},"classes":[]},{"id":1075,"url":"https:\/\/support.centreforelites.com\/ru\/4-characteristics-of-business-market-demand-2\/","url_meta":{"origin":1045,"position":2},"title":"4 CHARACTERISTICS OF BUSINESS MARKET DEMAND","author":"centreforelites","date":"10 \u0430\u043f\u0440\u0435\u043b\u044f, 2022","format":false,"excerpt":"Four demand characteristics differentiate the business market demand from the consumer market: (i) Demand is derived, (i ) demand tends to be inelastic, (i i) demand is widely fluctuating, and (iv) the market is well informed \u00a0DEMAND IS DERIVED The demand for a business product is derived from the demand\u2026","rel":"","context":"\u0412 &quot;Marketing&quot;","block_context":{"text":"Marketing","link":"https:\/\/support.centreforelites.com\/ru\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1091,"url":"https:\/\/support.centreforelites.com\/ru\/the-marketing-mix-controllable-marketing-variables\/","url_meta":{"origin":1045,"position":3},"title":"THE MARKETING MIX: CONTROLLABLE MARKETING VARIABLES","author":"centreforelites","date":"10 \u0430\u043f\u0440\u0435\u043b\u044f, 2022","format":false,"excerpt":"Definitionally, marketing mix is the mixture of controllable marketing variables that the firm uses to pursue the sought levels of sales in the target market","rel":"","context":"\u0412 &quot;Marketing&quot;","block_context":{"text":"Marketing","link":"https:\/\/support.centreforelites.com\/ru\/category\/marketing\/"},"img":{"alt_text":"THE MARKETING MIX. CONTROLLABLE MARKETING VARIABLES","src":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/THE-MARKETING-MIX.-CONTROLLABLE-MARKETING-VARIABLES.png?fit=470%2C466&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1089,"url":"https:\/\/support.centreforelites.com\/ru\/the-strategic-marketing-planning-process\/","url_meta":{"origin":1045,"position":4},"title":"THE STRATEGIC MARKETING PLANNING PROCESS","author":"centreforelites","date":"10 \u0430\u043f\u0440\u0435\u043b\u044f, 2022","format":false,"excerpt":"Strategic marketing planning is a five-step process that assesses current performance; establishes specific marketing objectives; determines positioning and differential advantage; selects target markets and measures market demand, and designs a strategic marketing mix.\u00a0 With the plans in place, the marketing programmes are implemented, while the results are monitored. If the\u2026","rel":"","context":"\u0412 &quot;Marketing&quot;","block_context":{"text":"Marketing","link":"https:\/\/support.centreforelites.com\/ru\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1092,"url":"https:\/\/support.centreforelites.com\/ru\/the-marketing-forces\/","url_meta":{"origin":1045,"position":5},"title":"The Marketing Forces in a Company","author":"centreforelites","date":"10 \u0430\u043f\u0440\u0435\u043b\u044f, 2022","format":false,"excerpt":"A company's marketing system often operates within the framework of marketing forces, which constitutes the system's environment. Such forces are either external or internal to the firm. \u00a0EXTERNAL FORCES: THE MARKETING ENVIRONMENT\u00a0 The external variables (also known as the marketing environment) general y are not control able by the organisation.\u2026","rel":"","context":"\u0412 &quot;Marketing&quot;","block_context":{"text":"Marketing","link":"https:\/\/support.centreforelites.com\/ru\/category\/marketing\/"},"img":{"alt_text":"The Marketing Forces in a Company","src":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/The-Marketing-Forces-in-a-Company.png?fit=720%2C540&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/The-Marketing-Forces-in-a-Company.png?fit=720%2C540&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/The-Marketing-Forces-in-a-Company.png?fit=720%2C540&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/support.centreforelites.com\/wp-content\/uploads\/2022\/04\/The-Marketing-Forces-in-a-Company.png?fit=720%2C540&ssl=1&resize=700%2C400 2x"},"classes":[]}],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/posts\/1045","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/comments?post=1045"}],"version-history":[{"count":2,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/posts\/1045\/revisions"}],"predecessor-version":[{"id":2044,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/posts\/1045\/revisions\/2044"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/media\/2041"}],"wp:attachment":[{"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/media?parent=1045"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/categories?post=1045"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/support.centreforelites.com\/ru\/wp-json\/wp\/v2\/tags?post=1045"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}