Marketing mix contains 4P’s i.e. Product, Promotion, Price and Place. All P’s are important for the marketing of the product, but the importance of price is different from other 3 P’s. As every Marketer do a lot of expense to manufacture a new product, to communicate its benefits to potential customers /consumers through promotion and to distribute product to different parts of the home and foreign country. Price is the only element which helps the marketer to overcome all the expenses and get profit.
Detail about the price and its importance
Price of a product refers to the amount of money customers have to pay to obtain product. Price is also an important factor affecting the success or failure of a product in the market.
The marketers have to properly analyse the following factors regarding the pricing of the product
Product Cost: Pricing decision is affected by the cost of preparing the product, to launch it in the market. Total cost of the product is the sum of fixed cost, variable cost and semi-variable cost.
The utility and Demand: Marketers keep the price of the product according to its use and demand in the market. If the product is highly demanded in the market then its price could be high to earn better profit.
Extant of competition in the market: If the market is highly competitive then one wrong decision could give failure to the product in the market. In the case of highly competitive market, price of the product must be kept below or similar to the competitor.
Government and legal regulation: To keep the fair competition and to protect the interest of the public, Government can intervene and regulate the price of commodities.
Pricing objectives: Generally the objective is stated to be maximizing the profits. But there is a difference in maximizing profit in the short run and in the long run. If the firm decides to maximize profits in the short run, it would tend to charge maximize price for its products. But if it is to maximize its total profit in the long run, it would opt for a lower per unit price so that it can capture larger share of the market and earn greater profits through increased sales. Apart from profit maximization, the pricing objectives of a firm may include obtaining market share leadership, surviving in a competitive market, Attaining product quality leadership.
Marketing methods used: Price fixation process is also affected by other elements of marketing such as distribution system, quality of salesmen employed, quality and amount of advertising, sales promotion efforts, the type of packaging, Product differentiation, credit facility and customer services provided.
So, Marketers should keep the price of the product after analyzing all the factors of pricing, to get success in the market.