Though in general the term “pricing decision” means the assessment of products profitability, this question is a complicated one. Making a pricing decision, a manager should take into account such aspects as cost and market factors as well as legal issues. Such decisions require from a manager thorough research of present and past situations as well as a bit of intuition to understand how well the current situation change in future. General rules of service cost determinants and behaviour represent the possibility of service profitable sale and providing at this or that price. Still, a manager should also take into account how much markup, markdown, or cost consumers may accept. Moreover, each proposition deals with different competitions, consumers’ demands, prices per unit, and different amounts of potential profit. The term “market factor” is sometimes described as the custom of firms and enterprises in this or that sphere of the market to move up or down in common; in fact, this process may be described by a simple example of a discount providing system: when some banks offer high deposit percents as a kind of discounting program one may expect that other banks would offer similar services very soon. The pricing strategy which a manager makes should take into account both cost and market factors. “The pricing decisions depend on how much customers value the product, the pricing strategies of competitors, and the costs of the product” (Bhimani, Horngren, Datar, Foster, 2008, p. 378).
There are various pricing strategies; all of them may bring you to benefit in a certain situation. For example, the “take it or leave” strategy may be good for some well-promoted enterprises, such as Coca-Cola. Realtors often use another method, when they set a high price and expect that customers would negotiate and bargain. Often, companies sell some of their goods or services at reduced prices. Nevertheless, a manager should remember three main influential factors such as customers, competitors or costs. Still, a manager must not forget about law regulations as long as these actions are not only illegal (and can be prosecuted), but they also damage the reputation of the firm, he/she works for. It would be irrational and foolish not to follow law regulations.
References
Bhimani, A., H., C. T., Datar, S. M., & Foster, G. (2008). Management and cost accounting. Upper Saddle River: Pearson Education.