Factors to consider when

setting prices and it’s

general pricing approaches
By group 2
 Price

 In the narrowest sense is the amount of money charged for a product or service.
 In a more broadly sense, is the sum of all the values that consumers exchange for the
benefits of having or using the product or service.
 Has been the major factor affecting buyer’s choice.
 Were set by negotiation between buyers and sellers/
 Is the only element in the market mix that produce revenue: all other elements represent
costs.
 One of the most flexible elements of the market mix.
 Fixed-price policies

 Setting one price for all buyers.

 A relatively modern idea that evolved with the
development of large-scale retailing at the end of
the nineteenth century.
 Pricing and price competition

 The number one problem facing many marketers.

 Many companies do not handle this well.
 Frequent problems of companies in pricing

 Too quick to cut prices to gain a sale rather than convincing buyers
that their products or services are worth a higher price.
 Pricing is too cost oriented rather than customer-value oriented.
 Factors to consider when setting prices

Internal factors
 Marketing External factors
objectives  Nature of the
 Marketing- Pricing demand
 Competition
mix strategy decisions
 Other
 Costs
environmental
 Organization
factors(economy
for pricing
, resellers,
government)
Internal factors affecting pricing decisions

 Marketing objectives
 Marketing-mix strategy
 Cost
 variable cost
 Total cost
 Fixed cost
 Marketing Objectives

 The company must decide on its strategy for the product.

 If the company has selected its target market and positioning
carefully, then its marketing-mix strategy, including price, will be
straightforward.
 A firm that has clearly defined its objectives will find it easier to set
price.
 Marketing-mix Strategy

 Price decisions must be coordinated with product design,

distribution, and promotion decisions to form a consistent and
effective marketing program.
 Decisions made for other marketing-mix variables may affect
pricing decisions.
 Companies often make their pricing decisions first and then base
other marketing-mix decisions on the prices that they want to
charge.
 Cost

 Set the floor for the price that the company can charge for its product.
 The company wants to charge a price that both covers all its cost for
producing, distributing, and selling the product, and delivers a fair rate of
return for its effort and risk.
 TYPES OF COST
 Variable cost
 Total cost
 Fixed cost
 Variable cost

 Vary directly with the level of production.

 These costs tend to be the same for each unit produced, their total
varying with the number of units produced.
 Total cost

 The sum of the fixed and variable cost for any given level
of production.
 Management wants to charge a price that will cover the
total production costs at a given level of production
 Fixed cost

 Also known as overheads.

 Are cost that do not vary with production or sales level.
 Organizational considerations

 Management must decide who within the organization should set price. Companies
handle pricing in a variety of ways.
 ORGANIZATIONAL CONSIDERATION FOR EACH LEVEL
 Small companies- prices are often set by top management rather than by the marketing
or sales department.
 Large companies- pricing is typically handled by divisional or product line managers.
 Industry markets- salespeople may be allowed to negotiate with customers within
certain price range