Study notes

Pricing - factors to consider when setting price

  • Levels: GCSE, AS
  • Exam boards: AQA, Edexcel, OCR, IB, Other, Pre-U

Pricing is often one of the most difficult things to get right in business. There are several factors a business needs to consider in setting a price:

  • Competitors – a huge impact on pricing decisions. The relative market shares (or market strength) of competitors influences whether a business can set prices independently, or whether it has to follow the lead shown by competitors
  • Costs – a business cannot ignore the cost of production or buying a product when it comes to setting a selling price. In the long-term, a business will fail if it sells for less than cost, or if its gross profit margin is too low to cover the fixed costs of the business.
  • The state of the market for the product – if there is a high demand for the product, but a shortage of supply, then the business can put prices up.
  • The state of the economy – some products are more sensitive to changes in unemployment and workers wages than others. Makers of luxury products will need to drop prices especially when the economy is in a downturn.
  • The bargaining power of customers in the target market – who are the buyers of the product? Do they have any bargaining power over the price set? An individual consumer has little bargaining power over a supermarket (though they can take their custom elsewhere). However, an industrial customer that buys substantial quantities of a product from a business may be able to negotiate lower or special prices.
  • Other elements of the marketing mix – it is important to understand that prices cannot be set without reference to other parts of the marketing mix. The distribution channels used will affect price – different prices might be charged for the same product sold direct to consumers or via intermediaries. The price of a product in the decline stage of its product life-cycle will need to be lower than when it was first launched.
Job board

Examiner - GCSE/ GCE - History

Pearson Edexcel, Nationwide (Home working)

Join the tutor2u community

With a tutor2u account you can access extra features to support your teaching & learning.

Subscribe to the daily digest

Curate your own content

Track your training schedule

Manage your resource library

Receive job alerts

Join the community

Already joined? Sign in now ›

More From the Digital Store

Exam-style and exam-standard 50 mark (60 minute) unit assessment paper for AQA A Level Business 3.3.

£15.00 (+VAT)

AQA A Level Business Unit Assessment (Unit 3.3)

Kinaesthetic Ansoff is a group activity designed to help deliver the concept of Ansoff’s Matrix as well as helping to develop the key exam skills of analysis and evaluation.

£5.00 (+VAT)

Kinaesthetic Ansoff

Exam-style and exam-standard unit assessment for section 3.4 of AQA A Level Business.

£15.00 (+VAT)

AQA A Level Business Unit Assessment (Unit 3.4)

Recruitment

Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u