Q. 4

What are the factors affecting determination of the price of a product or service? Explain.

Answer :

The factors affecting price of any product are categorised under two broad headings - internal factors and external factors.

A. Internal Factors


a. Cost: It means the cost incurred in producing the product and also includes the expenses of selling and distribution.


b. Objective: While fixing the price of product the marketer should consider the objective of the firm which may be to increase the profit, to capture a large market share or any other.


c. Product life cycle: The stage at with the product is in its life cycle also affects the pricing decision.


d. Promotional activity: The cost incurred in the promotional activity of the product is also kept on the price of the product.


B. External factors


a. Competition: It means the degree of competition existing in the market. Where the competition is high the prices will be low and vice-a-versa.


b. Government control: The government rules and regulations must be considered while fixing the price of the product.


c. Economic conditions: Economic condition prevailing in the market has to be considered while fixing the price.


d. Channel intermediaries: Longer the chain of intermediaries, the higher will be the prices of the goods.


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