External Factors: Customer Expectations

Possibly the most obvious external factor influencing price setting concerns what customers and channel partners expect from products they are considering for purchase. As we discussed, when it comes to making a purchase decision, customers assess the overall “value” of a product much more than they assess the price alone. When deciding on a price, marketers need to conduct customer research to determine what price points are acceptable. Pricing beyond these price points could discourage customers from purchasing.

Firms within the marketer’s channels of distribution also must be considered when determining price. Distribution partners expect to receive financial compensation for their efforts, which usually means they will receive a percentage of the final selling price. The percentage or margin between what they pay the marketer to acquire the product and the price they charge their customers must be sufficient for the distributor to cover their costs and earn a desired profit.