Page 3 - Lesson Note 4
P. 3
PRICING
When a product is bought, some money is paid for it. This money represents the
sum of values that consumers exchange for the benefit of having or using the
product and is referred to as the price of the product.
Pricing occupies an important place in the marketing of goods and services by a
firm. No product can be launched without a price tag or at least some guidelines
for pricing.
Pricing is often used as a regulator of the demand of a product. Generally, if the
price of a product is increased, its demand comes down, and vice-versa. Pricing is
considered to be an effective competitive weapon.
In the conditions of perfect competition, most of the firms compete with each
other on the basis of this factor. It is Factors Affecting Price Determination also
the single most important factor affecting the revenue and profits of a firm.
Factors Affecting Price Determination
1. Product Cost:
One of the most important factors affecting price of a Product or service is its
cost. This includes the cost of producing, distributing and selling the product.
The cost sets the minimum level or the floor price at which the product may be
sold.
Generally all marketing firms strive to cover all their costs, at least in the long
run. In addition, they aim at earning a margin of profit over and above the costs.
2. The Utility and Demand:
