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Chapter 13 1 The three major influences on pricing decisions are: costs, competitors, and customers. Managers have little discretion in setting prices in market situations which are not competitive. In less competitive markets where products can be differentiated by their features the pricing decision depends on the pricing strategies of competitors. Relevant costs for pricing decisions include manufacturing costs, but not costs from other value-chain functions. When prices are set in a competitive marketplace, product costs are the most important influence on pricing decisions. Reverse engineering has the objective of reducing costs while still satisfying customer needs. The target rate of retum on investment is the target operating income that an organization must earn divided by invested capital. Peakload pricing focuses on direct costs when setting prices for peak and nonpeak. periods: Life-cycle budgeting is necessary before a company can determine the product life. cycle of a given product. Customer lifercycle costs focus on the total costs to a customer of acquiring and using a product or service until it is replaced