A price is an expression of value. The value rests in the usefulness and quality of the product itself, in the image that is conveyed through advertising and promotion, in the availability of the product through wholesale and retail distribution systems, and in the service that goes with it.
A price is an expression of
value. The value rests in the usefulness and quality of the product itself, in
the image that is conveyed through advertising and promotion, in the
availability of the product through wholesale and retail distribution systems,
and in the service that goes with it. A price is the seller’s estimate of what
all of this is worth to potential buyers, recognizing the other options buyers
will have for filling the need the product is intended to satisfy.
To the extent that the product or
service finds markets and is profitable at given price levels, it provides a
viable economic base for building and maintaining a business.
In the competitive marketplace,
pricing is a game. The struggle for market share focuses critically on price.
Pricing strategies of competing firms, therefore, are highly interdependent.
The price one competitor sets is a function not only of what the market will
pay but also of what other firms charge. Prices set by individual firms respond
to those of competitors; they also are intended often to influence competitors’
pricing behaviour. All of marketing comes to focus in the pricing decision.
A way to think about making a
pricing decision is that price should be set somewhere between what the product
costs to make and sell and its value to the customer. If price exceeds the
perceived value of the product to potential purchasers, it has no market. If
the price is below what the product costs to produce, the business cannot
survive for very long. Where a price should be set between cost and customer
value is a strategic decision.
Many factors can influence this
decision, viz., competitors’ product/ price strategies, governmentally imposed
constraints and the seller’s and the buyer’s sense of what is fair. Finally the
most important determinant of price is the marketer’s objectives – what is the
firm trying to do. The discussion on pricing objectives is taken up in the next
Tags : MARKETING MANAGEMENT - Pricing Decisions
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