pricing are an indication of imperfections in the system.
MEANING & DEFINITION OF PRICING:
Pricing can be defined as the method by which a marketer decides in quantitative (monetary) terms the value of a product at any particular point of time. In a very narrow sense we can define Price as the money that acustomer shells out in order to acquire or use the product/service. However, this will not be a sufficient way of describing the price. In a broader sense, we can define price as “the sum total of all the values that a customer exchanges for the benefit of using a particular product/service.” Pricing is a managerial task. It involvesestablishing objectives, determining the factors affecting price and their corresponding significance, setting the price and controlling it when required. Price in fact means different things to different participants in anexchange process:Buyer’s view: For those making a purchase, price refers to what has to be given up in order to obtain the befitsfrom a product.Seller’s view: As far as sellers as concerned, price would reflect the revenue generated from a product and thuswould ultimately determine the profits they can generate.
ROLE OF PRICE MIX:
The market price of product influences wages, rent, interest and profits. That is, the price of a productinfluences the income earned by, or the price paid for, the factors of production labor, land capital andentrepreneurship. In this way, price becomes a basic regulator of the entire economic system because itinfluences the allocation of these resources. High wages attract labor; high interest rates attract capital and soon. Conversely, low wages, low rent or low profits reduce the availability of labor, land and risk takers.The price of a product or service is a major determinant of the market demand for the item. Price will affect thefirm's competitive position and its share of the market. As a result, price has considerable bearing on thecompany's revenue and net profit. The revenue is equal to unit price times the volume of units sold. The volumeitself, that is, the
measure of demand, is affected by the price. The profit is equal to revenue minuscosts. To some extent, costs are a function of volume and costs themselves are measured by their price. Priceaffects the market segment that will be reached by a firm. Because a person's income so often determines hisother socioeconomic characteristics, the price may influence the
nature of the company's market aswell as its quantitative limits.As far as the buyers are concerned, they must be able to derive a good value out of any purchase that theymake.Value = Perceived benefits receivedPerceived price paidThe price of the product is a direct means for the customer to either choose to buy the product or not.The price of a product also affects the firm's marketing program. In product planning, for example, if management wants to improve the quality of its product or add differentiating features, this decision can beimplemented only if the market will accept a price high enough to cover the costs of these changes. In thechannels of distribution, a properly priced product not only helps to attract the general types of middlemenneeded, but it can also attract desirable individual whole sales and retailers. The pricing structure will determinewhether the manufacturer or his retailers will be expected to finance the bulk of the promotional program.
Marketing Management, 1
semester, Jain University