Alano, Marie Lyne R.

BSBA MM 2-1

1. What are the demand influences in pricing decision?

There are numerous and multiple factors shaping market decisions. Price is
the only part of the marketing mix that contributes to income generation. A
marketer should therefore follow a well-designed marketing strategy. Before
fixing the price of the product, the marketer should be aware of the factors which
influence price decisions.
a. Organizational Objectives
Impact to a large extent pricing decision. Marketers must set prices according to
their organizational goals. For example, an organization has set itself the objective
of producing quality products so that prices are based on product quality.
Likewise, if the company aims to increase its sales by 18 percent every year,
reasonable prices must be set to increase the product's demand.
b. Costs
Impacts a company's price-setting decisions. Even if high costs are incurred,
the company may sell products at rates less than rivals. The corporation can
increase sales in the short term by adopting this approach but can not survive on
a longer basis. In order to minimize losses, advertisers must evaluate costs before
price changes. Prices cover raw material prices, payroll sale and storage,
marketing and advertisement charges, and overheads for office and
administration.
c. Legal and Regulatory Issues
Convince marketers to change price choices. Legal and regulatory
legislation lays down prices for different products, for instance insurance and
dairy. These rules can lead to pricing at minimum or maximum levels, freezing or
controlling.
 d. Product Characteristics
Include the nature of the product, product replacements, product life cycle
stage and product diversification.
e. Competition
Significantly affects prices. The organization matches pricing and changes
prices more or less than the competitors. The company frequently examines how
rivals respond to price changes.
f. Pricing Objectives
Help an organization decide on prices. For example, the pricing objective of
an organization is to increase market share by lower prices. It must therefore set
prices below competitive prices in order to gain market share. Discounts on
products are also a price target which impacts the decisions of the customer to
purchase a product.
g. Price elasticity of Demand
Respond to a rise in the product's demand as a result of price changes.
Under it arise three situations: a. Goods inelastic in production will be very cost-
effective b. Goods with greater demand than elastic will have a high c value.
Goods of flexible demand are fairly expensive.
h. Competitor’s pricing policies
Importance of companies ' pricing policies. In order to easily face the price
competition, the prices of a product should be determined.
i. Distribution channels
This requires a means by which producers ' finished products reach end
users. When it is a big distribution channel, the price of the product will be high
and the price of the product will be low when the distribution channel is short.
These are the main influencing factors in pricing decisions.
 2. Discuss how companies adjust their prices to take into account different
types of customers and situation.
Businesses should change their specific prices to reflect consumer and
contextual variations. There are seven price adjustment strategies: Discount and
allowance pricing, segmented pricing, psychological pricing, promotional pricing,
geographical pricing, dynamic pricing and international pricing.
a. Discount and allowance pricing.
Applied to a large proportion of businesses. For certain reactions, such as
early payment of bill, volume buys and off-season buying, most companies adjust
their basic price to reward clients.
Discounts are available as cash discounts, a reduction in prices for buyers
who immediately make their payments. A quantity discount can also be offered to
consumers who purchase large volumes, which means a price reduction. The third
type of discount is the seasonal account which is a price cut for consumers who
purchase goods or services out of season.
Allowances refer to a particular kind of list price cut. Trade-in allowances
for instance, are price reductions provided when you purchase a new product for
handing in an old one. Trade allowances are very common, particularly in the car
industry. Promotional allowances apply to bonus bonuses and price reductions for
ads or support programs by paying dealers.
b. Segmented pricing
A product or service in various segments is sold at different prices, even if
the price differential is not based on cost differences. The market needs to be
segment able, so different segments need to be in competition. Furthermore, the
cost of segmentation and market access cannot exceed the additional income
obtained from the price differences created.
c. Psychological pricing
This applies to markets that take into account cost theory not just the
economics. Most customers, for instance, use prices to determine value. One of
the price adjustment techniques might be the most powerful psychological
pricing.
d. Promotional pricing
In order to increase short-term sales, promotion pricing demands for
products below and sometimes even below the cost for the temporary price.
Companies therefore try to create excitement and urgency for purchases.
Promotional pricing could include discounts on ordinary prices to increase sales
and reduce stocks. In certain seasons, special event promotions could also be
used to attract more customers. Such a promotional price is also supported by
lower interest funding, longer guarantees and free maintenance.
e. Geographical pricing
Prices are set by the company for customers in various parts of the country or
world. There are five geographical pricing strategies:
 FOB-origin pricing: goods are placed free on board a carrier; the customer
thus pays the freight from the factory to the destination.
 Uniform-delivered pricing: the company charges the same price plus freight
to all customers, regardless of their location.
 Zone pricing: all customer within a zone pay the same total price, the more
distant the zone, the higher the price.
 Base-point pricing: the seller designates some city as a base point and
charges all customers the freight cost from that city to the customer. This
can level the geographical price differences if a central base-point is
selected.
 Freight-absorption pricing: the seller absorbs all or part of the freight
charges to get the desired business. Price differences are thus eliminated.
f. Dynamic pricing
Dynamic pricing means constantly changing pricing to suit the individual
customers and conditions ' preferences and desires. Based on the history, prices
have been generally determined by bargaining between buyers and sellers. Prices
have therefore been tailored to the particular customer and circumstance.
Dynamic pricing has developed rapidly and has become increasingly prevalent
among price adjustment strategies in recent years.
g. International pricing.
Industries selling their goods globally should assess the price in which they
work in the different countries. The price to a company in a nation may rely upon
many factors, including the growth of the wholesale and retail process, financial,
technological, laws and regulations. However, customer expectations and tastes
that differ from country to country, causing price differences. In addition, in
various markets the company may have different marketing objectives that
require price strategy changes.
3. Discuss the key issues related to initiating and responding to price changes.
Initiating to Price Change
The price is determined based on the cost and profit after products have
been produced. It may also require changes to the price thus determined. Prices
may need to be changed because of external and domestic environmental effects.
In leadership pricing, two main strategies can be taken as follows:
a. Initiating price cut
Every company wants its sales quantity to be increased. Price changes may
be necessary to achieve this goal. The producer should therefore reduce the
required level of product leadership prices. Sometimes the goods of companies
can only reach more markets after price reductions. In order to compete strongly,
this strategy should be adopted. Otherwise, either the market segment will be left
behind or the production will be abandoned. On the other hand, the market
targets may be driven by a constraint to cut product prices.

b. Initiating price increase

 Sometimes a price increase policy can be implemented that does not
impact sales quantities Price changes may require due to inflation of costs. Prices
can require changes because of policy regulation and revenue-enhancing policies.
On the other hand, consumer demand could suddenly increase. In these
circumstances, price changes are necessary. In this case, price changes are
necessary. If all continuations are appropriate, the price may be increased on a
timely basis. This should, however, be a very low percentage increase. The cost
should not be raised at the level that could ruin the company's image or
competitiveness.

Respongding to Price Change

While the cost of any product changes, various reactions from the affected
parties will arrive. Consumers can start with the first reaction. These reactions can
be positive if rates are increasing, or negative if they are raised. The organization
must respond to both reactions carefully and logically. The responses of rivals can
also happen in the same manner. The organization should provide a satisfactory
response, including costs, market research, travel expenditure, operational
expenditure, etc. In response to competitor and distributor responses, the
following strategies should be adopted.
a. Maintaining Price
The producers should make every effort to ensure that the cost remains the
same. Producers could reduce profit by some percent. This strategy is able to
maintain the existing market segments. In addition, the opportunity to enter new
market segments can be found. This can increase the sales quantity.
b. Increasing price and quality
Producers may increase the quality and price of existing products.
Manufacturing companies can bring new products to the market or add new
features to their competitive products. Such products have little more impact on
competition. competitors. This research cannot, though, last for a long time. Such
a strategy may also be adopted by other competitors. This may just be a normal
way to stop the responses of rivals. The company should after some time look for
alternative solutions.
c. Reducing price
The majority of customers are concerned about the price. Therefore, after
some time, the producer must cut the price of goods. This strategy may also be
adopted by competitors of similar products. Producers that are unable to enforce
this plan may have to leave the main segments of the market in many cases. Once
these sales have stopped, it takes very difficult work to produce new products.
Strategy should be followed to take a low percentage of profit. Still lower prices,
quality, characteristics and services should be retained. Products can only control
markets thereafter.

Resources:
Claessens, M. (2015, September 12). Price Adjustment Strategies –
Adjusting prices. Retrieved from https://marketing-insider.eu/price-adjustment-
strategies/.
Factors Affecting the Pricing Decisions. (2015, August 11). Retrieved from
http://www.economicsdiscussion.net/price/factors-affecting-the-pricing-
decisions/3833.
Initiating and Responding to Price Change. (n.d.). Retrieved from
http://analysisproject.blogspot.com/2014/03/initiating-and-responding-to-
price.html.