6.3:
Internal Considerations Affecting Price Decisions
Pricing decisions are influenced by internal factors, such as the company's marketing strategies, objectives, marketing mix, and organizational considerations.
Marketing strategies, including STP, significantly impact price. For instance, brands positioned as luxury command higher prices, while those posited as affordable are priced lower.
The company's objectives also shape pricing decisions, with profit-oriented goals maximizing profit through competitive pricing and sales-oriented objectives aiming to increase sales volume or market share.
Customer-oriented goals consider customer needs, perceived value, and willingness to pay while driving pricing decisions.
Marketing mix decisions, such as product design, distribution, and promotion, also influence price.
For example, a high-performing or innovative product with exclusive distribution and promotional requirements may necessitate a higher price to balance increased costs.
Lastly, organizational factors, such as who sets prices, influence pricing. These decisions, made by different management levels, must align with the firm's overall strategy, market conditions, and adaptability to ensure a successful pricing strategy.
6.3 Internal Considerations Affecting Price Decisions
The internal organizational factors impacting price decisions are as follows:
- Marketing Strategies– Strategies like Segmentation, targeting, and positioning are integral to pricing decisions as they help identify who the customers are, what they value, and how much they are willing to pay. It enables firms to set prices that attract their target customers while maximizing profitability.
- Company Objectives– Objectives like profit maximization, market penetration, and product-quality leadership influence price decisions. If the goal is to position the product as high-end or luxury, a higher price reflecting this premium perception is chosen.
- Marketing Mix Strategies– The marketing mix elements- product, place, promotion, and people – influence pricing. For example, a company can charge a premium price if a product is unique or highly differentiated. Similarly, the 'place' element can affect pricing – a product sold in upscale retail locations might warrant a higher price than one sold in discount stores.
- Organizational Considerations– Decisions about who sets the price can vary from top management to the finance department or the marketing team. The authority to make pricing decisions can influence how prices are set and adjusted over time.
These factors must align with the company's overall objectives and market position.