Internal Factors: Ownership Options

An important decision faced by marketers as they are formulating their pricing strategy deals with who will have ownership of the product (i.e., holds legal title) once an exchange has taken place. There are two basic options available:

  • Buyer Owns Product Outright – The most common ownership option is for the buyer to make payment and then obtain full ownership. Under this condition, the price is generally reflective of the full value of the product.
  • Buyer Has Right to Use but Does Not Have Ownership – Many products, especially those labeled as services, permit customers to make payment in exchange for the right to use a product but not to own it. This is seen in the form of usage, rental, or lease payment for such goods and services as: mobile phone services, manufacturing equipment, and internet file storage sites. In most cases, the price paid by the customer is not reflective of the full value of the product compared to what the customer would have paid for ownership of the product. It should be noted, under some lease or rental plans there may be an option for customers to buy the product outright (e.g., car lease), often requiring a large final payment.
Internal Factors: Costs
External Factors: Elasticity of Demand