What are factors affecting price determination?

Answer 1

1. Your Costs

If your rate doesn't include enough just to break-even, you're heading for trouble. The best thing to do is sum up all your costs and divide by the number of hours you think you can bill a year. Whatever you do, DON'T think you can bill every hour. You must account for sick days, holidays, hours working on the business, hours with no work and so on.

Also make sure you factor in all the hidden costs of your business like insurance, invoices that never get paid for one reason or another, and everyone's favourite - taxes.

2. Your Profit

Somewhat related to your costs, you should always consider how much money you are trying to make above breaking even. This is business after all.

3. Market Demand

If what you do is in high demand, then you should be aiming to make your services more expensive. Conversely if there's hardly any work around, you'll need to cheapen up if you hope to compete.

Signs that demand is high include too much work coming in, other freelancers being overloaded and people telling you they've been struggling to find someone to do the job. Signs that demand is low include finding yourself competing to win jobs, a shortage of work and fellow freelancers reentering the workforce.

4. Industry Standards

It's hard to know what others are charging, but try asking around. Find out what larger businesses charge as well as other freelancers. The more you know about what others are charging and what services they provide for the money, the better you'll know how you fit in to the market.

5. Skill level

Not every freelancer delivers the same goods and one would expect to pay accordingly. When I was a freelancing newbie I charged a rate of $25 an hour for my design, when I stopped freelancing recently my rate was $125 an hour. Same person, but at different times I had a different skill level and hence was producing a different result. Whatever your rate, expect it to be commensurate with your skill.

6. Experience

Although often bundled with skill, experience is a different factor altogether. You may have two very talented photographers, but one with more experience might have better client skills, be able to foresee problems (and thus save the client time and money), intuitively know what's going to work for a certain audience and so on. Experience should affect how much you charge.

7. Your Business Strategy

Your strategy or your angle will make a huge difference to how you price yourself. Think about the difference between Revlon and Chanel, the two could make the same perfume but you would never expect to pay the same for both. Figure out how you are pitching yourself and use that to help determine if you are cheap'n'cheerful, high end or somewhere in between.

8. Your Service

What you provide for your clients will also make a big difference to your price tag. For example you might be a freelancer who will do whatever it takes to get a job just right, or perhaps you are on call 24-7, or perhaps you provide the minimum amount of communication to cut costs. Whatever the case, adjusting your pricing to the type and level of service you provide is a must.

9. Who is Your Client

Your price will often vary for different clients. This happens for a few reasons. Some clients require more effort, some are riskier, some are repeat clients, some have jobs you are dying to do, some you wouldn't want to go near with a stick. You should vary your price to account for these sorts of factors.

Answer 2

Factors that affect pricing policy are competitor actions and the competitive landscape. Changes in the economy can also affect pricing policy. Changes in demand can affect pricing. Changes in supplies and operations can change prices as well.

Answer 3

1. product cost
2. the utility and demand
3. extent of competitiveness in the market
4. govt nd legal regulations
5. pricing objectives
6. marketing methods used

Answer 4

collusion

cost of production

wages

cost of sales

consumer demand

suppliers demand