Pricing and the Marketing Mix
Pricing might not be as glamorous as promotion, but it is the most important decision a marketer can make.
Price is important to marketers because it represents marketers' assessment of the value customers see in the product or service and are willing to pay for a product or service. The other elements of the marketing mix (product, place and promotion) may seem to be more glamorous than price, and thus get more attention, but determining the price of a product or service is actually one of the most important management decisions. Here's why.
- While product, place and promotion affect costs, price is the only element that affects revenues, and thus, a business's profits. Price can lead to a firm's survival or demise.
- Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, it will often affect the demand and sales as well. Both a price that is too high and one that is too low can limit growth. The wrong price can also negatively influence sales and cash flow.
- Problems occur if the marketer fails to set a price that complements the other elements of the marketing mix and the business objectives, as pricing contributes to how customers perceive a product or a service. A high price indicates high quality. The term luxury comes to mind. If, however, a firm wants to position itself as a low-cost provider, it will charge low prices. Just as they do with high-end providers, consumers know what to expect when they see low prices.
So, as you can see, it is important that a company sets the right price. A company's success can depend on it. However, with so many factors to consider along with the lack of a crystal ball that will show the effect of a price change, It isn't so easy to do.