Factors Effecting Price Decision

First of all the effecting of price decision is many competitors want to establish and maintain loyal customer, they often match their competitors’ prices. Some retailers will give an extra discount if you find the same product for less somewhere else. Similarly, if one company offers you free shipping, you might discover other companies to. With so many product sold online, customer can compare the prices of many merchants before making a purchase decision. Also the availability of substitute product affects a company’s pricing decision as well. If the customer can find as same shoes for 30 percent less at a second store, would you buy them? There a good chance you might.

Next is about the economy and government laws and regulation. The economy also has a tremendous effect in the economic pricing decision. We noted that factor in economic environment include interest rates and unemployed level. When the company is weak and many people are unemployed, companies often lower their prices. In international markets, currency exchange rates also affect pricing decision. Pricing decision is effected by federal and state regulation. The regulations are designed to protect consumer, promote competition and encourage ethical and fair behavior by business.

The intent of the act is to protect small business from larger business that try to extract special discounts and deals for themselves in order to eliminate their competitors. After that price fixing which occur when firms get together and agree to charge the same price, illegal. Usually, price fixing involves setting high prices so customer must pay a high price regardless of where they purchase a good or services.

Other than that the product cost also effecting the prices decision. The cost of product is including the amount spent on product development, testing and packaging required have to be taken into account when a pricing decision is made. So do the costs related to promotion and distribution. For example when a new offering is launched, its promotion cost can be very high because people need to be made aware that it exists.

 Thus, the offering’s stage in the product life cycle can affect its price. Keep in mind that a product may be in a different stage of its life cycle in other market. For example while sales of the iPhone remain fairly constant in united states, the Koreans left the phone was not as a good their current phones and was somewhat obsolete. Similarly, if a company has to open storefronts to distribute and sell the offering, this too will have to be built into the price the firms must charge for it.

The total costs include both fixed costs and variable costs. Fixed costs, or overhead expenses, are costs that a company must pay regardless of its level of production or level of sales. A company fixed cost includes items such as rent, leasing fees for equipment, contracted advertising costs, and insurance. The variable costs are costs that change with a company level of production and sales. Raw material, labor, and commission on unit sold are example of variable cost. They have too variable costs, such as the cost of gasoline for the car or your utility bills, which very depending on how much you use it.