Setting a Price

Any specific pricing decision should always be made in the context of the pricing strategy an organisation has opted to follow. These can vary from a skimming or penetration approach to being the cheapest in the market, or simply following the lead of a major player. Costs are also used as a basis for pricing, but are not usually considered to be a sound basis for setting prices, although prices must, in the end, yield income in excess of total operating expenses. As well as strategy, there are, however, a number of situational factors which will also influence the exact price chosen. Thus, when the occasion arises which requires a pricing decision, an organisation’s pricing strategy will provide the main approach to be adopted, but situational variables will determine the actual price paid.