State and explain five factors to consider while determining the price of your product or service
Five factors to consider while determining the price of your product or service
- Input costs: The higher the input costs, the higher the final price. An increase in labour or transportation could increase the final price.
- Demand for the product: The higher the demand, the higher the production volume the lower the input costs, the lower the final price.
- Target market: Income level of the target market
- Type of product: Luxury products can be priced higher.
- Pricing technique used to determine the price: Promotional pricing could be lower than demand oriented pricing.
- Substitutes and complements: If there are similar products that could replace a product, a high price may result in loss of sales to the substitute.
- If the price and demand of complement good increases, the other product may increase at the same rate, e.g. prices of computers and keyboards may increase at the same time.
- The economic climate and availability of goods and services: When there is a shortage of a certain product, people are prepared to pay more for it.