What is the pricing?

Price is the amount of money that we must sacrifice to achieve something that we desire. Price is only one thing that generates money. There are no other things generate money.

From the customer viewpoint, the price is a monetary expression of the value of dimensions of quality or features compare to other products. The price relation can be expressed as –

  • Price= Quality/ Value

In the market place, the price is viewed as the payment for quality of a product.

From the psychological standpoint, the price represents a quantitative estimate or subjective image of the benefits from a selection of a group of products features.

A market place offers a bundle of features of value products or services. This bundle may include physical or performance features. These features are the reliability of the product, convenience of use, the flexibility of use and the aesthetics of appearance.

Price is the most visible thing. It directly impacts on a firm’s performance in the market. Based on the nature of the business, success is always measured by the extent revenues from sales. Ideally, a set of price will ensure the highest margin consistent with the volume consideration. Besides, it considers customer evaluations of products, response to competitive threats and predicts all competitive inroads.

Pricing may face complexities and changes in the market place in turn of marketing. Because of globalization, demographic changes in customers, shifts in public policy and technological changes may influence the marketplace to make more difficult to do business.

Higher competition may ensure higher customer satisfaction. Because of having competition, all producers must ensure a higher quality than the trade partners. That’s why they charge the higher price of their products. They also provide greater customer loyalty and reduce their marketing costs.

Some people believe that the marketplace set the price. So they have no control over it. That’s why; they try to cut their internal cost. The reduction of internal cost helps them to get higher profit margins. This is possible only to some extent like product quality, product performance, customer satisfaction and charge a small amount of price in the marketplace.

To make a higher profit, we must reduce costs in producing a product. It is true that the pricing decision does not depend on the competing price or differentiated products. It depends on a growing number of ongoing interactions between the firms. Have a look-

  • Products and services of the firms
  • Target customers
  • Competitors
  • Adopt different effective approaches
  • Unique product
  • Quality variations

For example, Dell computer has obtained a positional advantage with low prices. Besides, Maytag and federal express have successfully used differentiation and command a substantial premium over industry rivals.

Successful pricing can work as a bridge to fulfill a gap between internal and external market demand. This demand is helped to achieve a positional advantage in the marketplace. Primarily, a firm charges the optimum price for its product. It helps a firm long-term probability to sustain in the marketplace. Moreover, a firm can adopt a strategic option for its betterment in the marketplace. The strategic options ar look like-

  1. The cost structure of the firm
  2. The competitive status of the firm
  3. Marketing strategies (based on competition)
  4. Organizational capabilities

 

 

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