Pricing is the only element of the marketing mix that generates revenue

When a company is charged with price fixing, it is usually ordered to take some type of action to reach a settlement with buyers.

Role of price in marketing mix ppt

Although this may boost initial sales, low price usually equates to low quality and this may not be what customers to see in your product. Durable goods such as TVs, stereos, and freezers are more price elastic than necessities. This may be done to establish position in a market with preexisting similar products on offer. By contrast, when the demand for a product stays relatively the same and buyers are not sensitive to changes in its price, the demand is price inelastic Buyers are not sensitive to price changes and demand is relatively unchanged.. Some strategies may call for complex computation methods and others are intuitive decisions. For example, an item market will be perceived as closer in price to than Price elasticity The amount of sensitivity to price changes, which affects the demand for a product. A high price indicate a high quality hence a lower price indicate a low quality.

Narayandas, D. Although this may boost initial sales, low price usually equates to low quality and this may not be what customers to see in your product. These are meant to generate interest in the product or make use of a special occasion or event.

Pricing is the only element of the marketing mix that generates revenue

Market share objectives are popular in this regards. Maximize Profit Margin: Another objective may be to increase the profit margin for each unit and not focus on the total number of units sold. For example, while sales of the iPhone remain fairly constant in the United States, the Koreans felt the phone was not as good as their current phones and was somewhat obsolete. The reason for this importance is that where the rest of the elements of the marketing mix are cost generators, price is a source of income and profits. However, pricing needs to be given its due attention since it has great impact on the rest of the activities and the company. The formula for calculating the price elasticity of demand is as follows. Going Rate This pricing strategy is more common in selling environments where the companies have little to no control of the market price. This may be done to establish position in a market with preexisting similar products on offer. Once a position is created, the prices may be raised. In theory, price has really determined by the discovery of what customers preserved is the of the item on sales. The upper limit to the price to be charged is set by the market - unless, of course, the customer must purchase the product and we are the sole supplier. It is often impossible to prove that a misstep by a company is deliberate or not. These are often perceived as the more interesting aspects of the product and marketing mix. Often this amount is stated as a percentage of sales or capital investment. The rest are cost incurring factors.

This method may be used in a changing industry where even costs of production are unpredictable. Recall from the five forces model discussed in Chapter 2 "Strategic Planning" that merchants must look at substitutes and potential entrants as well as direct competitors. Price Discrimination When the same product is sold at different prices to different sets of consumers, it is called price discrimination.

Credit Terms You allow consumers to pay for your products at a later date. This strategy is used commonly within the car industry as I found out when purchasing my car.

price mix pdf

Premium Pricing A high price is set to establish an exclusive product of high quality. The entire marketing mix elements are important but price is the most important element among the 4Ps.

Firms that produce technology, medicines, and beauty products are likely to use this pricing strategy. Some products, such as cigarettes, tend to be relatively price inelastic since most smokers keep purchasing them regardless of price increases and the fact that other people see cigarettes as unnecessary.

Price Flexibility You let the reseller or the sales person modify the price according to an agreed range. Or will they believe the value is not equal to the cost and choose an alternative or decide they can do without the product or service?

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Price, the Only Revenue Generator