Price Price is the amount of money requested or exchanged for a product. Price is an important element of the marketing mix. Every business faces the

Factors Influencing Pricing Strategies

1. Company Goals

• Prices align with the company's overall objectives.

• Example: High prices suggest high-end products; low prices suggest discount products.

2. Expenses

• All products incur costs related to creation and distribution.

• Pricing must cover production costs plus desired profit.

3. Customer Perception

• Price can signal the value or quality of a product.

• High prices might suggest better quality, but excessively high prices can deter purchases.

4. Competition

• Price changes can impact competitors seriously.

• Price Competition: Competing based on price.

• Nonprice Competition: Competing based on other factors (e.g., brand loyalty).

5. Supply and Demand

• Direct relationship between supply, demand, and price.

• High demand with low supply often raises prices.

• Low demand with high supply usually lowers prices.

6. Economic Conditions

• Economic downturns often lead to lower prices.

• Prices typically rise during periods of economic prosperity.

7. Product Life Cycle

• Introduction Stage: Prices may be high to recover development costs.

• Growth Stage: Prices typically decrease as competition increases.

• Maturity Stage: Prices stabilize as sales level off.

• Decline Stage: Prices drop significantly to sell off remaining inventory.

8. Pricing Product

• Selling price must cover creation and operational costs.

• The break-even point is crucial; it's where revenue equals costs.

• Markup is added to the break-even price to determine final selling price.

9. Psychological Pricing

• Techniques to create value perception:

  • Odd Pricing: Prices ending in odd numbers (e.g., $9.99).

  • Even Pricing: Prices ending in even numbers (e.g., $40).

  • Prestige Pricing: High prices to suggest quality.

  • Bundling: Grouping products together for a single price.

10. Discount Pricing

• Used in B2B and B2C, includes:

  • Cash Discounts: Early payment incentives.

  • Promotional Discounts: For advertising products.

  • Quantity Discounts: Price reduction for bulk purchases.

  • Seasonal Discounts: Purchase before the season.

  • Trade Discounts: Off the list price for wholesalers.

11. Unfair Pricing Practices

• Examples of unethical practices:

  • Bait and switch

  • Price fixing

  • Price discrimination

  • Deceptive pricing

  • Predatory pricing

12. Governmental Price Controls

• Price Ceilings: Maximum prices set to protect consumers.

• Price Floors: Minimum prices set to support producers.

13. Place (Distribution)

• Involves getting products to consumers.

• Direct Channel: Manufacturer to end-user.

• Indirect Channel: Manufacturer to wholesalers, retailers, then to end-user.

14. Intermediaries

• Intermediaries connect producers to consumers; they handle transactions and logistics.

• Types include wholesalers, retailers, and agents.