PRICING AS AN ELEMENT OF THE MARKETING MIX

Anytime anything is sold, there must be a price involved. The focus of this lesson is to present concepts,
principles, and techniques that provide guidance to help a seller set the best price.

What is Pricing in Marketing Mix?

Marketing mix or the 5 P’s is the combination of elements that play a role in promoting and delivering your
products and services to consumers or clients. It's about putting your product or service in the right place at
the right time for the right price. The elements of a marketing mix are the aspects of marketing that a
business will leverage to promote its goods or services. There are five elements to consider: product, price,
place, promotion, and people.

Price
This element concerns how you price your product or service. Pricing can be tricky because you
need to estimate as accurately as possible the value of what you offer along with what it costs you in
materials, time, and overhead to produce it.

As you consider those factors, think about what your target market is willing and able to pay, and whether or
not they think your product is worth what you're charging given what they perceive as the value of your
product, what your competitors are charging for the product, and what other alternative products are
available to satisfy the same needs and wants. Pricing decision cannot be taken lightly as it has a profound
impact on various aspect of a business. Price is the revenue-generating element of the marketing mix, it is
vital that marketers set the right price both to match buyer perceptions and to maximize company profits.
Profit is determined by subtracting total expenses from total revenue.

There are three major Influences on Pricing Decisions that you will consider in your business:

1. Customer’s Willingness to Pay- Customer’s Willingness to Pay will be influenced by what they can
afford and what they consider to be a good value for their money.The Customer’s Willingness to Pay will
also depend on what features they find appealing or beneficial (or not), what price point seems fair for what
they’re getting, what your competitors are offering, and what other companies in your industry charge for
similar products or services.

If customers think that what you offer is priced high compared to what your competitors provide for the
same value, then it may not make sense for them to purchase from you even if there’s pent-up demand.

2. Competitor’s Pricing- If there’s high demand for what you’re selling but multiple companies are selling
the same thing, it’s important to know what your competitors are doing, what their prices are, and what
strategies they’re using (such as discounts or bundled pricing).

3. Costs- The third major influence on pricing decisions is what it costs to make and distribute your product
or service. This includes the cost of materials, labor, shipping & transportation fees, marketing expenses for
advertising campaigns, etc.

Prepared by:

HYACENTH KE B. ABAO