Question

First please discuss why pricing is important to any business? Then please discuss two aspects of pricing. please includeexamples.

Answer 1

ANS : Price is both the money someone charges for a good or service and what the consumer is willing to give up to receive a good or service.

Pricing is an important decision making aspect after the product is manufactured. Price determines the future of the product, acceptability of the product to the customers and return and profitability from the product. It is a tool of competition.

Importance of Pricing: Most Flexible Marketing Mix Variable, Setting the Right Price, Determine the Profitability and a Few Others

Importance of Pricing – 4 Factors: Flexible Elements of Marketing Mix,

Right Level Pricing,

Price Creates First Impression and

Vital Element of Sales Promotion

Pricing decisions can have very significant consequences for the organization. It is one of the first considerations for many customers and it determines the profit margin on products.

Factor 1. Flexible Element of Marketing Mix:

Price is the most adjustable aspect of the marketing mix. Prices can be changed rapidly, as compared to other elements like product, place or promotion. Changes in product design or distribution system would take a long time to be implemented.

Factor 2. Right Level Pricing:

The wrong price decision can bring about the downfall of a company. It is extremely significant to fix prices at the right level after sufficient market research and evaluation of factors like competitors’ strategies, market conditions, cost of production, etc.

Factor 3. Price Creates First Impression:

Often price is the first factor a customer notices about a product. While the customer may base his final buying decision on the overall benefits offered by the product, he is likely to compare the price with the perceived value of the product to evaluate it. After learning about the price, the customers try to learn more about the product qualities.

If a product is priced too high, then the customer may lose interest in knowing more. But if he thinks that a product is affordable, then he would try to get more information about it.

Factor4. Vital Element of Sales Promotion:

Being the most flexible component of marketing mix, price is the most important part of the sales promotion. In order to encourage more sales, the marketing manager may reduce the price. In case of goods whose demand is price sensitive, even a small reduction in price will lead to higher sales volume. However prices should not be fluctuated too frequently to stimulate sales.

Price is an important element of the marketing mix for the following reasons:

i. Price is the most important factor for a consumer when it comes to making a purchase decision. Rarely will it be otherwise. As such, the right kind of pricing strategy can help achieve organisational goals.

ii. Price can be easily changed and is flexible thereby helping the organisation to respond quickly to marketplace changes.

iii. Price can also be used as a differentiating factor to set aside the said product from other products in the same category.

iv. Price is also often used to target a particular segment of customers.

v. And, last but not the least; price is the only element of the marketing mix that fetches revenue for the organisation.