There are too many factors when it comes to pricing products. Companies, therefore, must make an assessment about which are the most important to make the right decision
When we buy a product or provide us with a certain service, the final question will always be the same: how much is owed? This is when one of the most important aspects of marketing comes into play: PRICE. Also, many people, regardless of the quality of the products, buy those that are simply worth less. Here are some factors that are important to companies when setting prices.
First, we will define price as the amount of money charged for a product or service, or the value consumers pay to purchase it. A very important fact is that it is the only element of the Marketing Mix that produces income, since the other 3 represent costs. Furthermore, its flexibility is greater than theirs.
INTERNAL FACTORS FOR PRICE SETTING
Marketing Goals: If one company decides to produce cars that compete with the most luxurious out there, then the price will be high, but if another decides to make furniture that fits the budget of the average worker, its price should not be that high. That is, depending on the positioning that a company decides to achieve, it will set its appropriate price.
When we buy a product or provide us with a certain service, the final question will always be the same: how much is owed? This is when one of the most important aspects of marketing comes into play: PRICE. Also, many people, regardless of the quality of the products, buy those that are simply worth less. Here are some factors that are important to companies when setting prices.
First, we will define price as the amount of money charged for a product or service, or the value consumers pay to purchase it. A very important fact is that it is the only element of the Marketing Mix that produces income, since the other 3 represent costs. Furthermore, its flexibility is greater than theirs.
INTERNAL FACTORS FOR PRICE SETTING
Marketing Goals: If one company decides to produce cars that compete with the most luxurious out there, then the price will be high, but if another decides to make furniture that fits the budget of the average worker, its price should not be that high. That is, depending on the positioning that a company decides to achieve, it will set its appropriate price.
There are other objectives that the company takes into account when setting its prices. For example, if the goal is to survive alone, in the face of fierce competition or a decrease in sales, you could sell the affected products at a low price, forgetting your profits and hoping that conditions will change for the better.
On the other hand, if the objective is to raise current profits, thinking only of the present and not of long-term performance, the company could set the prices of its product at a point where all its expenses are covered and some profit is generated.. Finally, if what you want is leadership in the quality of the product, these are sold at a high price since the expenses incurred to be the best were high; however the reward will be greater.
Marketing mix strategy: let us remember that the 4 P`s are of utmost importance to achieve the success of a company, for this reason, the price setting must go in parallel with the other 3 elements to build a coherent marketing program and focused on the same point. Every decision made about one of the 4 P`s will affect the others.
Costs - This is one of the most important factors for pricing. It is hardly logical to determine these, based on all the expenses that were incurred for the manufacture of a product, in addition to including a rate of return in accordance with the efforts and risks that were had.
Organizational considerations: It is very important to determine who will set the prices of a product in a company. If it is small, the decision can be made by the manager himself, or if the company is medium or large, the marketing and sales departments or the product line managers can determine the most suitable price.
On the other hand, in industrial markets, it may be the customers who determine how much to pay, logically within a margin accepted by the seller of the products.
Internal factors
- Marketing Goals Organizational Considerations Costs Marketing Mix
EXTERNAL FACTORS FOR PRICE SETTING
Market and demand: it is very important to take these elements into account, since just as costs can establish the minimum price to be charged, the market establishes the upper limit when setting a price. Therefore, it is necessary to determine how the competition acts or how varied prices can be managed or determined by market factors.
It is also worth remembering that generally the higher the price, the lower the demand and vice versa.
Other external factors: a company could determine its prices by the economic conditions of the market (recession, inflation, interest rates, etc.) since these elements affect both the producer and the consumer. Likewise, government interference can cause certain prices to be established within the market.
External factors
- Market and demand Macroeconomic situation
In conclusion, we can say that a price is determined by an endless number of factors, it is our decision to choose and value in the best way everything that is offered to us in order to be sure that we pay just enough for something that was worth it.
