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Pricing Policies (External Factors (Customers :<3: (2) Price elasticity…

- - - - Elastic :red_flag:
        
        Small change in price may produce a large change in quantity demanded
      - Inelastic :red_flag:
        
        Quantity demanded is not responsive to price
      - Thus, banks may try to maximise total revenue by increasing the price of inelastic services and reducing the price of elastic ones.
  - - - Where organisations have broadly similar cost structures, price-cutting can be destabilising and can ultimately lead to price wars.
  - - - Brokers & Independent Financial Advisors (IFA)
    - - However, they add to the overall cost of making the product available to customers, thus inflating the price
- - - - Example :pencil2:
        
        Profit maximisation
        
        Market share
        
        Product quality leadership
  - - - Mass channels
        
        Example :Branches
      - Selective channels
        
        Example:Priority Banking Centres.
  - - - Incurred regardless of the level of sales
    - - Relate directly to the number of units sold
    - - 1) Difficult to distinguish between what constitutes a fixed cost & a variable cost
        
        Example: Labour cost
      - 2) Banks have a high level of fixed costs that are related to central operations and the branch network
        
        In determining prices, these fixed costs need to be allocated across many different services handled by these central departments and branches.
      - 3) Same product will incur different costs for different customers
        
        Example: Current account of a customer with a large number of transactions each month will cost significantly more than the account that has substantial credit balances and few transactions.
    - - Can occur between consumers of the same product / same sector
      - Problem :red_cross:
        
        Leave banks vulnerable to competitors who are able to cost and price more effectively