Introduction to pricing decision:
Pricing is a very critical decision in the marketing management. The main objective of the firm, that is, to earn a profit very much depends upon the correct price decision. After meeting all the costs involved, the sales revenue generated must yield a surplus before there can be profits. The sales revenue figure is however materially affected by the price charged for the product. What price should be changed for the product is a very crucial question. Several factors - economic, social, political, and other factors - influence the pricing decisions. Pricing decision is handled in a variety of ways in the different companies. In the small companies, price decision, is taken by the top management. In some large companies, it may be in the hands of divisional and product line managers but here also top management sets the general pricing policy and objectives. Pricing is a problem in four types of situations:
1. Where the firms develop or introduces a new product and it is to fix the price of the product for the first time.
2. When circumstances so developed that lead the firm so consider initialling a price change.
3. When competition forces the firm to initiate a price change and
4. When the company produces several products that have interrelated demands and or costs.
Thus the price setting is a very important decision and should be taken very carefully.