Factors affecting prices:

• objective: The firm must decide on the strategy for its product. The objective could be survival, profit maximisation, market share, leadership or product quality leadership. E.g. a company may have survival as the objective when there is heavy competition in which case it may set low prices to increase demand.
• Cost: They set the floor for the price that the company can charge a price that both covers all its cost for producing, distributing and selling the product and delivers a fair return on its effort and risk.
• Market and demand: The market and demand set upper limits. Both consumer and industrial buyers balance the price of a product against the benefits of owning it.
• Consumer perception of price and value: In the end the consumer will decide if the price is right or wrong. The perception will affect the consumer's buying decision. Pricing decisions must be buyer oriented. Effective, buyer-oriented pricing involves understanding how much value consumers place on the benefits they receive from the product and selling a price that fits its value.
• Competitors' prices: Consumers always evaluate a number of companies' products prices before buying.
• Economic factors such as boom, recession, inflation and interest rates. The consumer price index all affect pricing decisions.
• Government legislation for example minimum price levels.
• Social concerns.