2. Concept
• Basically, a price is the amount of money or anything that a buyer
gives to a seller in exchange for a good or a service.
• Price is only element in the marketing of a firm that generates revenue.
Meaning:
• Pricing refers to the process of determining what a company will
receive in exchange for its products or services.
• It's the monetary value assigned to goods or services based on
various factors, including production costs, market demand,
competition, and perceived value.
3. Importance of Pricing
• Revenue Generation: Pricing directly impacts a company's revenue. Effective pricing
strategies can maximize profits by capturing the maximum value from customers.
• Competitive Advantage: Pricing can be a powerful tool for gaining a competitive edge
in the market. Offering competitive prices or positioning as a premium brand can attract
customers.
• Brand Image: The price of a product or service often reflects its perceived quality and
value. Strategic pricing can enhance brand perception and attract the target market.
• Market Share: Pricing influences market share by affecting demand. Flexible pricing
strategies can help businesses penetrate new markets or defend existing ones.
4. Objective of Pricing
• Profit Maximization: One of the primary objectives of pricing is to maximize
profits by setting prices that cover costs and generate surplus revenue.
• Market Share Growth: Some businesses aim to increase market share by
offering competitive prices to attract more customers.
• Revenue Growth: Pricing strategies can focus on increasing overall revenue by
encouraging higher sales volumes or selling premium-priced products/services.
• Customer Satisfaction: Setting fair prices that align with customer expectations
can lead to increased customer satisfaction and loyalty.
5. Determination of Pricing
• Costs: Production, distribution, and marketing costs must be covered to ensure
profitability.
• Demand: Understanding customer demand and price elasticity helps in setting prices that
maximize revenue.
• Competition: Competitive pricing analysis ensures that prices are in line with industry
standards and avoid losing customers to competitors.
• Perceived Value: Customers' perception of a product's value relative to its price plays a
crucial role in pricing decisions.
• Market Conditions: Economic conditions, inflation rates, and market trends influence
pricing strategies.
6. Pricing Methods and Strategies:
• Cost-Based Pricing
• Demand Based Pricing
• Competition Based Pricing
• Other Pricing methods:
• Value Pricing
• Going rate pricing
• Transfer pricing
