Influences on pricing decisions
Two of the major influences on pricing decisions are customer demand and the actions of competitors.
i. What are the other two major influences?
ii. Briefly describe customer demand and actions of competitors.
iii. In the text example, Sydney Sailing Supplies faced the question of defining its own products narrowly as sailing supplies or more broadly as boating supplies. Explain why these definitions could influence how the management of Sydney Sailing Supplies views either 'customer demand or actions of competitors'.

i. Two major influences on pricing decisions are product costs and political, legal and image-related issues.
ii. Customer demand refers to the number of units that customers wish to obtain as a function of several variables including price, design features, quality etc.
'Actions of competitors' refers to the actions that other sellers of products may take in response to initiatives by our firm. These actions include, but are not limited to, changes in price, selling terms, quality, customer service after sale and variety within the product line.
iii. If the product line is viewed narrowly as sailing supplies, then customer demand is viewed narrowly as relating to those customers who are already committed to sailing. However, a wider view would suggest that customer demand be viewed as not consisting solely of people who are committed to sailing, but rather as people who may change their consumption to other types of boating activities such as canoes and small motorboats.
In a similar fashion, the actions of competitors may be viewed narrowly as the actions of other firms that produce sailing supplies or may be viewed broadly as the actions of firms that produce items for canoes or for small motorboats. If the narrow view is taken, the company is not fully taking into account customers' or competitors' actions, which may influence their sales, market share and profits.