FACTORS INFLUENCING PRICING

METHODS AND PRICE AND NON

PRICE COMPETITION
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Pricing
Price is a marketing mix elelmemt that

produces revenue; the other products costs.

Price is also one of the most flexible element.
Prices may be defined as exchange of goods
and services in terms of money..
Pricing is the art of translating into
quantitative terms the value of product or a
unit of a service to customers at a point in
time.

FACTORS INFLUENCING PRICING

DECISIONS
Having a pricing objective isnt enough. A firm also has to

look at a myriad of other factors before setting its prices.

Those factors include the the demand, the customers
whose needs it is designed to meet, the external
environmentsuch as the competition, the economy, and
government regulationsand other aspects of the
marketing mix, such as the nature of the offering, the
current stage of its product life cycle, and its promotion and
distribution. If a company plans to sell its products or
services in international markets, research on the factors for
each market must be analyzed before setting prices.
Organizations must understand buyers, competitors, the
economic conditions, and political regulations in other
markets before they can compete successfully.

FACTORS INFLUENCING
INTERNAL FACTORS

EXTERNAL FACTORS

Organisational factors
Marketing mix
Product differentiation
Cost of product
Objectives of firm

Demand
Competition
Suppliers
Economic conditions
Buyers
Government

Organisational factors
Management must decide who within the organization should set prices.
Companies handle pricing in a variety of ways. In small companies, prices
are often set by top management rather than by the marketing or sales
departments. In large companies, pricing is typically handled by divisional
or product line managers. In industrial markets, salespeople may be
allowed to negotiate with customers within certain price ranges. Even so,
top management sets the pricing objectives and policies, and it often
approves the prices proposed by lower-level management or salespeople.

Marketing mix
Marketing experts view pirces as only one of the many important elelments of
the marketing mix. A shift in any one of the elements has an immediate
effect on the other three i.e production ,promotion and distribution

Product differentiation
The price of the product also depends upon the characteristics of the
product. In order to attract the customers different characteristics
are added such as quality, size, colour, package etc.

Cost of product
Costs set the floor for the price that the company can charge. The
company wants to charge a price that both covers all its costs for
producing, distributing, and selling the product and delivers a fair
rate of return for its effort and risk. A company's costs may be an
important element in its pricing strategy. Many companies, such as
Southwest Airlines, Wal-Mart, and Union Carbide, work to become
the "low-cost producers" in their industries. Companies with lower
costs can set lower prices that result in greater sales and profits.

Objectives of the firm

. While fixing the prices of the product, the marketer should con
sider the objectives of the firm. For instance, if the objective of
a firm is to increase return on investment, then it may charge a
higher price, and if the objective is to capture a large market
share, then it may charge a lower price
For example, when Honda and Toyota decided to develop their Acura

and Lexus brands to compete with European luxury-performance cars

in the higher-income segment, this required charging a high price. In
contrast, Motel 6, Econo Lodge, and Red Roof Inn have positioned
themselves as motels that provide economical rooms for budgetminded travelers; this position requires charging a low price. Thus,
pricing strategy is largely determined by decisions on market
positioning.

External factors
Demand
The market demand for a product has a big impact on the pricing since demand
is affected by factors like number, and size of competitors buyers preference
etc. are taken into considerstion while fixing the price

Competition
Another external factor affecting the company's pricing decisions is
competitors' costs and prices and possible competitor reactions to the
company's own pricing moves. A consumer who is considering the
purchase of a Canon camera will evaluate Canon's price and value
against the prices and values of comparable products made by Nikon,
Minolta, Pentax, and others. In addition, the company's pricing
strategy may affect the nature of the competition it faces. If Canon
follows a high-price, high-margin strategy, it may attract competition.
A low-price, low-margin strategy, however, may stop competitors or
drive them out of the market.

Suppliers
Suppliers of raw materials and other goods can have a significant effect on d price
of a product.

Economic conditions
The inflationary or deflationary tendency effects pricing. In recession period the
prices are reduced to a sizeble extent to maintain the level of turnover on the
other hand the prices are reduced to a sizeble extent to maintain level of turnover

Buyers
The various customers and bussiness thet buy a companys product have an infleunce on
pricing decision.their nature and behaviour for the purchase of a product affect pricing when
their number is large

Government
Government rules and regulation must be considered while fixing the prices. In certain

products, government may announce administered prices, and therefore the marketer has to
consider such regulation while fixing the prices.

Price and non price competition

Price competition
The main aim of businesses is to maximise profit.
Firms may try to increase sales by cutting price.
A firm engages in price competition by regularly

offering products at as low a price as possible and

accompanied by a minimum of services. Discount
houses and off-price retailers compete in this way.
A firm can make use of the price to compete by:
1. Changing its prices
2. Reacting to price changes made by competitors

Price competition involves

Discount,
Buy one get one free, Sale

Value Pricing: In response, many companies in diverse industries are using

value pricing. This form of price competition aims to improve a product's

value - that is, the ratio of its benefits to its price and related costs. Using
value pricing, a firm:
1. Offers products with lower prices but the same, or perhaps added benefits;
and
2. At the same time seeks ways to slash expenses so that profits don't suffer.
Proactive and Reactive Changes: After an initial price is set, a number of
situations may prompt a firm to change its price. As costs increase, for
instance, management may decide to raise its price rather than to maintain
price and either cut quality or promote the product aggressively. Temporary
price cuts may be used to sell excess inventory or to introduce a new product.
Price Wars: From a seller's standpoint, the big disadvantage in price-cutting
is that competitors will retaliate - and not let up. A price war may begin when
one firm decreases its price in an effort to increase its sales volume and/or
market share. The battle is on if other firms retaliate, reducing price on their
competing products.

Non price competition

Businesses often prefer to compete through non-price competition. In
non-price competition, sellers maintain stable prices and attempt to
improve their market positions by emphasising other aspects of their
marketing programmes. In non-price competition, sellers attempt to
shift their demand curves to the right by means of product
differentiation, promotional activities, or some other technique .
With non-price competition, however, a seller retains some

advantage when a competitor decides to undersell. The best

approach in non-price competition is to build strong - if possible,
unassailable - brand equity for the firms products. Two methods
of accomplishing this are to develop distinctive, hopefully
unique, products and to create a novel, appealing promotional
programme. In addition, some firms emphasise the variety and
quality of the supplementary services they offer to customers.

Product Differentiation
Making the good or service APPEAR different or

superior to the competition

location
Choosing a better location than its competitors

(convenience, classy, close to other shops,

good parking).
Businesses of similar goods locate close
together as it becomes acceptable for
consumers to buy a certain product in that
particular area (e.g. second hand car dealers,
restaurants, takeaways, etc)

Packaging:

Firms compete by making their packaging more attractive

(stand out).
Includes logos and trademarks that helps to identify a
product (e.g. horse-National Bank)

Advertising:

Media e.g. TV, radio, print media (magazines, newspapers,

posters etc)
Usually used for non-price competition by attracting attention
to the business by other means
Branding:
Producers can create a brand name to differentiate from
another product e.g. Coke for cola, BP for fuel.
Brand loyalty can be encouraged through competitions and
promotions (fuel stations)

Product modification:
Producers attempt to bring in new variations,
i.e. new features (cars- cruise control

Thank you