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Several factors influence pricing decisions in an organization. These include cost of production, market demand, competition, target audience, and the perceived value of the product or service. The company's overall business strategy and objectives also play a crucial role. For instance, a company may decide to set a lower price to penetrate a competitive market or a higher price for a unique, high-quality product. Additionally, external factors such as economic conditions, regulatory environment, and cultural considerations can also impact pricing decisions.
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The company also applies price increases to certain drinks and sizes rather than the whole product line. "By raising the price of the tall size brewed coffee exclusively, Starbucks is able to capture consumer surplus from the customers who find more value in upgrading to grande after witnessing the price of a small drip with tax climb over the $2 mark. By versioning the product in this way, the company can enjoy a slightly higher margin from these customers who were persuaded by the price hike to purchase larger sizes," Price Intelligently experts say.
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Take the most advantageous pricing approach to increase profitability of your organization. Use our Pricing Strategies presentation to outline factors...
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