Pricing

Price is the amount of money charged for a product or service, it’s a sum of all the values that the consumers exchange for the benefits of having or using the product or service.

A company’s pricing decisions are affected by the internal company factors and by the external environmental factors.

The internal factors that affect the pricing are: the company’s marketing objectives, marketing mix strategy, cost and the organisation.
Examples of common objectives are survival, current profit maximisation and product quality leadership.

Price is also one of the marketing mix tools that a company uses to achieve its marketing objectives.

Company wants to charge a price that covers the costs for producing, distribution, selling the product and make a certain amount of profit.

There are two forms of company’s costs, a fixed and a variable cost. Fixed costs do not vary with production or sales level, for example monthly rent, interest, executive salaries, etc. and variable costs vary directly with the level of the production.

Totals cost is the sum of the fixed and variable costs for any given level of production.

The external factors that effect the pricing include the nature of the marketing and demand, competition and other environmental elements.

Next week..........The external factors that effect the pricing (Four types of market )