FACTORS AFFECTING PRICING OF A PRODUCT

Being competitive in today’s marketplace requires competitive content and competitive pricing. Competition is the final price determinant, if a company sets competitive pricing by analyzing the market conditions then it will definitely earns good profit. So pricing plays a very important role in any business for its existence. Because in today’s World businesses are dependent on customers. He is not an interruption on work; he is the purpose of it. He is not the outsider to the business, he is part of it. Businessmen are not doing him a favor by serving him; even he is doing a favor on them by giving the opportunity to do it. So a customer will not pay a penny more than the true value of the product.

So the moment a Company makes a mistake in pricing, it has to suffer losses and its market share will also get affected. But keeping only the pricing objective is not enough. A company has to look from wider view and analyze the other factors of marketing mix, such as nature of its offering, Product life Cycle, promotion and distribution etc.

MAJOR FACTORS AFFECTING THE PRICE OF A PRODUCT ARE:

INTERNAL FACTORS:-

·         COST: While determining the price of a product, the firm should consider the cost involved in producing the product. It must able to cover its both Variable cost and Fixed cost while deciding the price.

·         IMAGE OF THE FIRM: The pricing of a product should also be on the basis of a firm’s image, if it is a startup or it doesn’t has recognition than its pricing of a product should be low not high as compared to HUL or P&G, because they enjoy the goodwill in the market.

·         PRODUCT DIFFERENTIATION: The price of a product is also depend on its characteristics. Ifa product is able to add value, quality, size, color, attractive package then only it will attract the customers, and they will be ready to pay higher price.

·         MARKETING MIX: Pricing is one of the factor of Marketing Mix. But change in any of the remaining 3P’s ie. Production, promotion, and place will also effect, so pricing should be done after proper Marketing Mix.

EXTERNAL FACTORS:-

·         DEMAND: One of the major external factors is demand of the product. It is effected by factors like number and size of the competitors, the buyers, their capacity to pay, their preferences etc. should be examined carefully before deciding the price.

·         COMPETITIORS: How competitors price and sell their product will have a tremendous effect on pricing. So while fixing the price of a product, the firm should study the market and the degree of the competition exist there. If the competition is high then the price of a product should be below to face the completion, and if its low then the price should be high.

·         GOVERNMENT LAWS AND REGULATIONS: Regulations are designed to protect consumers, promote competition, and encourage ethical and fair behavior by businesses. The factors like interest rates, taxes 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.

·         CHANNEL INTERMEDIARIES: Before deciding the price of a product the marketer must consider a number of channel intermediaries and their expectations. The longer the chain of intermediaries, the higher would be the prices of the goods.

·         CUSTOMERS: 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.

Therefore Profit is not something to end on the end, it is something to plan for in the beginning. So these all are the important factors which affects the pricing of a product. So a firm should analyze all the factors before deciding the price of the product.