What is the importance of pricing?
4 years ago
Marketing
There can be no marketing without pricing. It is a very significant element of marketing mix, because it affects both demand and supply i.e. both buyer and seller. Pricing decisions should therefore be taken very carefully, incorporating both the strategic environment and the existing status of the market. Prices should neither be too high nor too low. While too high price, may drift away the customers and cause loss to sales, too low a price may bring less revenue and eventually the firm may be out of business.
The importance of pricing can be seen from the following points:
- Price affects the profitability position of a firm. It affects the total revenue and net profits of the firm. This is because profit = revenue – cost and revenue = price X quantity sold.
ADVERTISEMENTS:
- Price act as an agent for economic development of the economy as it affects the level standard of the society.
- Price affects the demand of the product. Law of demand states that if price goes up, demand decreases and vice-versa, other things remaining constant.
- Price is a quantitative element and can be measured easily. This is important when certain things like quality of the product cannot be evaluated. Price of the product helps in arriving at a conclusion here. High price products are generally perceived to be of better quality and vice-versa.
- Price greatly influences the decisions relating to promotion and advertisement. Promotions expenditure increases the price of the product.
- It is the price which determines the type of customer who will use the product. High-priced products are generally purchased by status-conscious people and higher income group people and low priced goods by general masses.
Susmita Sah
Jan 16, 2022