Discuss the factors that affect pricing.
Price is a critically important element of the choices available to businesses in trying to attract demand for their products. These factors can be divided into two parts– factors within the control of a business and factors outside the control of a business.
Factors within a businesses’ control include:
(i) Production cost
(ii) Product research and development
(iii) Advertising and sales promotion budget
(iv) Effectiveness of distribution (e.g. access to retail outlets; trained distributor agents)
(v) Marketing skills
(vi) Control on marketing expenditure
(vii) Objectives of firm
Factors outside the control of business include:
(i) The price of substitute goods and services
(ii) The price of complementary goods and services
(iii) Prices of raw material
(iv) Customer’s income
(v) Government policies
(vi) Taxation
(vii) Level of competition
