Price
Price is the amount a business charges its customers for its product or service.
Prices are set according to how much a customer is willing and able to pay. Customers want value for money and this may mean a business needs to set low prices to generate high levels of sales.
However, some products require higher prices, as they are perceived to be high-quality, luxury goods. Examples include sports cars and designer bags. The general rule is that high quality usually means a high price whereas low quality usually means a low price.
Companies use pricing strategies as a way of making sales. For example, a company might lower its prices to increase sales and demand, or increase its prices as a way of making customers view its products as being of higher quality.
Factors that influence price include:
- competition – a business may need to reduce its prices to compete with other businesses
- customer opinions – about the product and its worth
- brand image – some products can have a higher price because customers perceive the business' brand as desirable
- availability – if a product is in short supply, this can drive up the price as customers are more likely to pay more for something in limited supply (eg a concert ticket)
