Friday, September 24, 2010

Important Factors Pricing Decisions

What are the most important factors on pricing decisions?

Consumer demand: This is a major influence on all aspects of a business operation. A company must carefully look at and research the price that customers are willing to pay, the quality desired, and any accompanying trade-offs between these competing concerns. Companies routinely use market research and test marketing to gain such information and will consciously adjust their pricing to confirm this type of research.

Strategy of Competition: Must consider the products and pricing strategies of competitors.

Industry Specific Factors: Costs are a factor in the pricing process, more in some industries than in others. For example, the market will drive the prices in some types of commodities. In other cases (, prices are set by adding a markup to the market cost in order to derive a profit.. Generally speaking, prices are set by considering both cost and market influences and how much people will pay to buy a specific product.

Companies must also be conscious of political, legal, and image-related issues when setting prices. Price discrimination, regulatory agencies, and concerns about reputation are often a factor in how high or low a product price may be set.

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