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Factors to be Considered in Price Setting

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What factors should be considered in price setting? Which of these factors is most important? Why? Why is adapting the price of a product important?

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Solution Summary

The solution examines factors to be considered in price setting. The factors that are most important are determined.

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What factors should be considered in price setting?

To improve a company's pricing capability, managers should focus on the process, not on the outcome. The question to ask is: Have we addressed all the considerations that will determine the correct price? Price setting should also complement the company's overall marketing strategy. A company's pricing policy sends a message to the market - it gives customers an important sense of a company's philosophy.

Those who involve in the coordination of price process (that is, the participants in the pricing process which are accounting provides cost estimates; marketing communicates the pricing strategy; sales provides specific customer input; production sets supply boundaries; and finance establishes the requirements for the entire company's monetary health) should understand the pricing objective. This is because proper pricing requires input from a number of people, but if there is no mechanism in place for creating a unified whole from all the pieces, the overall pricing performance is likely to be dismal (Dolan, 1995).

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