Discuss the Main Factors Affecting Product Pricing in the UK Essay Example

“price makers” rather than “price takers”. Furthermore, the cost of production affects price of the product. There are firms use cost-plus strategies to estimate final price and many of them includes additional percentage to make profit. Also it is a way to calculate the profit they will make, but there are some problems that firms might face. First problem is to decide which costs firms should include to the final price.

Second one is the problem of determining the quantity of output at which firms will survive in the market.As the importance of costs in the estimating the final price, it is also important that firms strategy influences in change of price. For example, firms could decrease price in order to increase market share, or to keep a current market share of a firm. In order to gain market share usually large firms practice the market-share strategies. Also this strategy is used to eliminating competitors.

Moreover, pricing strategies of the firm affects on the product life cycle. As it known that all products have certain finite market life, and along with product’s life cycle price for it changes.Product life cycle has three phases which product goes through after introduction, if it does not fail. First phase is growth phase. In this phase the market share is raising and firm’s leaders could use two types of strategies which are “price skimming” and “price penetration”. Main features of “price skimming” strategy is high price of the product, which could bring a large profit in the short-run.

This strategy suits the market of fashion clothes or technology and etc. In other words this strategy usually used if product has short life.Other

strategy, which is “penetration”, requires low price for product but life of this kind of products are long, and producers might expect revenue in long-run. Second phase of the product life cycle is maturity phase.

After product raised the market share in the growth phase, it is reach maturity. The price strategies in this phase depends on market share that product has already created and also price depends on the quality in compare to competitors’ products. Obviously, price also depends on period of time which maturity phase have take place in the lifecycle.Last phase which product goes through before the life cycle finishes is Decline phase. In this phase producers will try to sustain high price by the loyalty of remained customers.

Sometimes, when product finishes his life cycles, manufactures will try to represent their products as “classics”. However, if this strategy will be successful producers might earn profit from these products in the decline phase. In the price setting stage market segmentation strategies also take place.As the peoples’ needs are not identical, market divides by the segments in other words segments which are distinguished from each other. Market can be divided by various criteria, for example age, gender, health and etc.

The price of products is usually affected by the demand in the specific segment of market. In the case where one firm finds new segment of market, that firm becomes a monopolist in that segment in short-run as the demand is inelasticity and changes in price have small effect in the quantity of the demanded product.In conclusion, main factors affecting prices are various and pricing decision depends on the objectives of firm and on the market

where firm operates. In fact, there are not small quantity of pricing strategies which firm might to use to set price and there are also affects the price of goods and services.