O'Reilly logo

Setting Profitable Prices: A Step-by-Step Guide to Pricing Strategy--Without Hiring a Consultant, + Website by Marlene Jensen

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 4

Environmental Factors That Can Affect Your Pricing

image In-a-Rush Tip
Read under the headings “The Economy” and “Competitors,” but you can skip the rest of the chapter. However, skim the headlines to make sure you aren’t skipping a critical area for your industry.

Environmental Factors Overview

Environmental factors that marketers consider in setting prices are factors that are beyond the control of the company. They include:

  • The economy
  • Competitors
  • Government regulation and legal
  • Social trends
  • Technological change

The Economy

The economy can have a large influence on the optimal price for your new product. But, it won’t affect all prices, so a knee-jerk lower price in a bad economy isn’t your smartest move. Following are some observations based on my years in pricing products and services:

  • Don’t be the first competitor to lower prices in a bad economy. Here’s why:
    • Your customers won’t feel any extra loyalty to you for it; in bad economies, consumers think lower prices are just what they deserve. They absolutely will not love you for it—or even thank you for it.
    • Your competitors will probably then lower theirs, resulting in lower prices becoming etched in stone.
    • Maybe if you don’t lower prices, neither will your competitors. Then you’ll have a healthier profit margin in bad times.
  • If your product is a necessity, you are less likely to need to discount.
  • If you sell to ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required