Explain the significance of pricing strategy.
Pricing decisions are very important for the marketing organisations because of the following reasons:
- Pricing Decisions are Crucial in Nature:
Improper pricing analysis and strategic evaluation can lead to revenue loss for a marketing organisation. Prices set too low may mean the company is missing out on additional profits that could be earned, if the target market is willing to spend more to acquire the product.
Additionally, attempts to raise an initially low-priced product to a higher price may be met by customer resistance. Prices set too high may also have an impact on revenue as it hinders the customer interest to buy the product. Thus, setting the right price needs a lot of market knowledge and testing of different pricing options.
- Price Triggers the First Impressions:
Often consumer perception of a product is formed as soon as they come to know of its price. It is more important to know if the customers are more likely to reject a product when they know about its price, i.e., customers are avoiding learning more about the product (full offering) if they find the price to be too high.
- Important Part of Sales Promotion:
Many a time price adjustments are a part of sales promotion like lowering the price for a short-term to stimulate interest in the product. However, marketers must be careful against the temptation to adjust the price too frequently since it can make the customers conditioned to anticipate price reduction. For example – the months of February and August are off-season months for sales for most brands, thus, people tend to shift their purchase decisions to sale seasons.
