Question

What are the internal and external factors that influence the pricing decisions? Please this is a marketing question

Answer 1

Broadly there are two factors that influence the pricing decisions i.e. Internal Factors and external factors.

Internal Factors includes followings: (these are controllable factors)

• Business Objectives (Pricing contributes to achieve goals/objectives)
• Costs (As price is always decided based on costs of product or services)
• The marketing mix (e.g. Advertising campaign)
• Product differentiation (based on features/quality of product)
• Organisational factor (top management responsibility is to take overall strategic decisions and at lower level, individual pricing strategy is being dealt with  )

External Factors included following (these are not in control)

• Demand (if demand is elastic, the organisation shouldn't fix high prices, however, it should fix lower prices)
• Competition (Price should be fixed after considering rates fixed by other competitors)
• Government policy (Enactment of any new legislation)
• Economic conditions-In recession pricing is reduced and in boom period price is increased)
• Buyer behaviour- for the purchase of a particular product, brand or service etc. affect pricing