How Does Internal & External factors that impact Pricing Decisions (PRICE) Work?

Pricing is simply deciding how many coins you need to hand over for a toy, based on what it costs to make and what your friends are willing to pay. Imagine you have a lemonade stand. You have to set a price that covers the lemons and cups (costs) while also being fair to your neighbors (customers).

These are things you can control, like how much effort goes into making the product. If you buy fancy jars instead of plastic cups, your production costs go up. You must raise the price so you don’t lose money. Think of it like baking cookies. Flour is cheap, but if you use chocolate chips and vanilla beans, the ingredients cost more. You charge extra because the recipe is richer. This is the internal side, where you look at your own ledger to make sure every cookie sale covers the sugar, butter, and your time.

These are things happening around you that you cannot change, like weather or what other stands charge. If it rains, fewer kids come by. You might lower the price to attract more customers with a "rainy day special." Also, if your best friend next door sells lemonade for 50 cents and yours is better, you can charge 75 cents because people see the value. This is the external side, where you watch the market like a hawk. If big competitors drop their prices, you might have to follow suit or explain why your drink is worth more.

Ultimately, pricing balances what you spend with what the world will pay. It is a constant tug-of-war between your budget and your buyer's wallet.