POM/U3 Topic 8 Price: Importance of Price in the Marketing Mix
Most of the time marketers give more importance to activities like market research, product management, promotion and distribution. These are considered important aspects of marketing mix. But pricing is also a very important element in the 4 P’s of marketing mix. This is the only element that generates revenue and supports other activities like product distribution, promotion and advertisement.
(i) Pricing is Flexible
Pricing is the only single variable that is flexible and can be changed within no time. On the other hand, the remaining elements of marketing mix like distribution channels, promotional campaigns and can increase the cost.
(ii) Set the right Price
When setting the price keep in mind the strategic objective of the organization. For example, if a marketer set too high or too low in both pricing decisions it can affect the sale growth.
When setting a price, it conveys a message to your potential customers about your product and service and creates a perceived value of marketing mix. This perceived value can affect the consumer decision-making process. High pricing means high-quality products and services. Low pricing products and services indicate that you are a low-cost provider.
Another importance of Pricing in Marketing Mix
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.