Thus, prices represent corporate goals and policies and have a significant role in influencing marketing performance. Any seller should possess this knowledge as they can overcome competition to some extent by setting a reasonable price and thus, providing value for money. It’s A Means Of ComparisonĪny company which sells high, medium, and low-priced goods must decide whether or not its pricing is equal or below or more than its competitors. However, price is quite flexible so that an organisation can react rapidly to changes in the market. Prices can be adjusted quickly in comparison to other elements of the marketing mix.įor instance, changing the product design, distribution system, or advertisement would take a long time. It’s The Most Adjustable Aspect Of The Marketing Mix Thus, an effective pricing strategy solves this problem. It’s a fact that many buyers are more likely to reject a product if it is costly. While a company’s overall marketing strategy may be excellent, many customers first see an item’s price tag even before developing an interest in the product. It’s A Trigger Of First ImpressionĪt the moment of purchase, the consumer attaches emphasis to the price of the good instead of its value. Instead, they should use short-term price reductions such as short-term discounts to enhance their sales. However, marketers shouldn’t modify prices constantly as it may result in customers predicting price reductions. It has been noted that even a slight price decrease leads to larger sales volume in the case of goods whose demand is price sensitive. Thus, the impact of price rises or falls is immediately reflected in the increase or decrease in product profits. It is clearly evident from the profit equation that price is the only variable that has a multiplier effect on profit.
In fact, price is the foundation for profit generation. Profit is the company’s ultimate goal, and the price of any commercial undertaking directly influences profits. For instance, if the train travel prices go up significantly, the customers may explore the idea of bus travel. Usually, customers respond to high prices by switching to alternate options like substituting the product when the prices go up. Under the law of demand, the price and quantity demand of a normal good is inversely proportionate, that is, the higher the price of a good, the fewer people will demand that good and vice-versa. Too high or low a price can put the development of the product at risk. The price set by a producer directly affects the level of demand.
#DEFINE FINANCE MIX STRATEGY FULL#
So, prices must be given full regard, as they significantly impact the company’s remaining activities.įor the following reasons, pricing is of essential importance. Price mix greatly influences a business’s growth and survival, prosperity and profitability, and brand image. Thus, it should be weighed above other marketing elements since it is the only marketing mix component that generates revenue while other elements create cost. The product’s price stipulates the product’s future, customer acceptability and is an instrument against the competitors. A well-chosen price can help the firm attain its financial objectives, adapt to the market realities, and conform to other elements of the marketing mix (product quality, distribution issues, promotion challenges). That is, it is the economic value of a product expressed in monetary terms. Simplistically, price is the amount of money customers have to pay to obtain a product. These variables include the cost of making the product, the factors that influence the pricing decisions, the various pricing strategy, the pricing objectives, etc.
Price mix is the combination of different ‘price-related variables’ determined by a producer to fix the price of the product or service he offers.
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