Some of the major factors influencing pricing decisions of a company are as follows: The competitors also keep an eye on the price levels of a company. Very low prices may invite price wars, while high prices without sufficient additional features or quality invite bad publicity. Distribution channel members also exert pressure on prices by demanding higher margins.
Understand why companies must conduct research before setting prices in international markets.
Learn how to calculate the breakeven point. A firm also has to look at a myriad of other factors before setting its prices.
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. Next we look at each of the factors and what they entail. Customers How will buyers respond?
Three important factors are whether the buyers perceive the product offers value, how many buyers there are, and how sensitive they are to changes in price.
In addition to gathering data on the size of markets, companies must try to determine how price sensitive customers are. Will customers buy the product, given its price? Or will they believe the value is not equal to the cost and choose an alternative or decide they can do without the product or service?
Equally important is how much buyers are willing to pay for the offering. Figuring out how consumers will respond to prices involves judgment as well as research.
Price elasticity The amount of sensitivity to price changes, which affects the demand for a product. Think about a pair of sweatpants with an elastic waist. Elasticity refers to the amount of stretch or change. For example, the waistband of sweatpants may stretch if you pull on it.
Similarly, the demand for a product may change if the price changes. The formula for calculating the price elasticity of demand is as follows.
Durable goods such as TVs, stereos, and freezers are more price elastic than necessities. People are more likely to buy them when their prices drop and less likely to buy them when their prices rise.
By contrast, when the demand for a product stays relatively the same and buyers are not sensitive to changes in its price, the demand is price inelastic Buyers are not sensitive to price changes and demand is relatively unchanged. Demand for essential products such as many basic food and first-aid products is not as affected by price changes as demand for many nonessential goods.
The number of competing products and substitutes available affects the elasticity of demand.
Some products, such as cigarettes, tend to be relatively price inelastic since most smokers keep purchasing them regardless of price increases and the fact that other people see cigarettes as unnecessary.
Service providers, such as utility companies in markets in which they have a monopoly only one providerface more inelastic demand since no substitutes are available. If you wanted to buy a certain pair of shoes, but the price was 30 percent less at one store than another, what would you do?
Some retailers, such as Home Depot, will give you 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 will, too. With so many products sold online, consumers can compare the prices of many merchants before making a purchase decision. If you can find a similar pair of shoes selling for 50 percent less at a third store, would you buy them?
Recall from the five forces model discussed in Chapter 2 "Strategic Planning" that merchants must look at substitutes and potential entrants as well as direct competitors. The Economy and Government Laws and Regulations The economy also has a tremendous effect on pricing decisions.
In Chapter 2 "Strategic Planning" we noted that factors in the economic environment include interest rates and unemployment levels. When the economy is weak and many people are unemployed, companies often lower their prices.
In international markets, currency exchange rates also affect pricing decisions.FACTORS AFFECTING SMARTPHONE PURCHASE DECISION AMONG MALAYSIAN GENERATION Y Karen Lim Lay-Yee mobile phone shipments (The Star (b), ). external search.
Whereas extended decision making normally will be on the high involvement. These factors include the offering’s costs, the customers whose needs it is designed to meet, the external environment—such as the competition, the economy, and government regulations—and other aspects of the marketing mix, such as the nature of the offering, the stage of .
Environmental Analysis Of Mobile Phone Industry Marketing Essay. Print Reference this. Published: 23rd March, Inflation is also one of external factors affecting the company, therefore this issue must be considered because the company has no power over it (whereby money loses its value).
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Print Reference this. Inflation is also one of external factors affecting the company, therefore this issue must be considered because the company has no power over it (whereby money loses its value).
What range of pricing would you prefer for a phone with good features.