Pricing Decision
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The Basis for Pricing Decision
In general there are two main factors that need to considered in the pricing basis, ie the internal factors corporate and external environmental factors.
Company Internal Factors
• Destination Marketing Company
The main factors that determine the pricing is the company’s marketing objectives. That goal can be profit maximization, survival company, reached a large market share, creating leadership in terms of quality, overcoming competition, implementing social responsibility, and so on.
• Marketing Mix Strategy
Price is only one component of the marketing mix. Therefore, the price needs to be coordinated and mutually
supported by other marketing mix, namely products, distribution, and promotion.
• Cost
Cost is a factor that determines the minimum price should be set so that the company did not experience losses. Therefore, each company must pay great attention to the aspects of cost structures (fixed and variable), and the types of costs others, such as out of pocket cost, incremental cost, opportunity
cost, controllable cost, and replacement cost.
• Organization
Management needs to decide who in the organization should set the price. Each company handles a problem
setting prices according to their way. In small companies, generally prices are set by management top. In large companies, often the problem determination price is handled by the division or product line manager. In market industry, the salesperson (salespeople) are allowed to the customers to establish the range (range) a certain price. In an industry where price fixing is a key factor, usually the company has special pricing department is responsible to the marketing department or management summit.
Those who have the ability to influence on pricing are the sales manager, production manager, finance manager, and accountants.
External Environmental Factors
• The nature of markets and demand
Every company needs to understand the nature of the market and demand it faces, whether including perfect competition, monopolistic competition, oligopoly competition, or competition monopoly. Another factor is no less important is the elasticity of demand.
• Competitions
There are several points that influential forces in the competition an industry, namely competition in the industry concerned, the substitution products, suppliers, customers and threat of new entrants. This requires the existence of information in analyzing the characteristics of competition, between the number of firms in other industries, the relative size of each members / number of consumers in the industry, product differentiation, and easy to enter the industry concerned.
• Environmental Elements External Other
In addition to the factors above, the company also needs to consider the factors of economic conditions (inflation, recession, the level of interest), policies and government regulations, and social aspects (environmental concerns).