Pricing - Things to Consider Before Determining the Right Price

Pricing can be defined as the amount that the company will receive in exchange for the products or services it will sell to the customers. Pricing is one of the most important Ps of the four Ps of marketing mix. The difference between pricing and other Ps of marketing mix is that it is the only revenue generating P, while the others Ps of the marketing mix are cost centers.
There are different kinds of factors that needs to be consider while determining what a price company should charge and some of these factors include:

• The cost of manufacturing and operating
• Competition in the industry ( direct as well as indirect competition)
• Market condition
• Taxes
• Investment or startup cost of a business
• Demand and supply in the industry
• Substitute Products
• Demand and supply of substitute products
• Markup that company would like to charge
• Quality of the product or service

What a price must be able to do

To determine why pricing is important we must know what price is able to do. Pricing is one of basic as well as important step for any business. A good pricing strategy must have three things:

• Attain the financial objectives in terms of revenues and profitability of the company
• It must be real and sensible according to the market condition i.e. customers must be buy the product at this particular price
• Pricing must be able to support the positioning of the product plus it must be consistent with others Ps of the marketing mix

Pricing is also powered by the kind of distribution channel used, and the kind of promotion and advertising used plus the product or service quality.

o Pricing should be high if it is exclusive or produced or operated at a higher cost.
o If the quality of the product or service is not the best, then it must be low priced.

Efficient Price:

Before determining the price at which you would like to sell you must know what an efficient price is. Every profession has a different view to analyze what an efficient price is let us analyze what do different professionals say about an efficient price.

From the view point of marketers:
An efficient price is close to the price that most of the customers are willing to pay.

From economics point of view:
Good pricing strategy is one that balances both the price floor and price ceiling.

From Financial point of view:
An efficient price must be able to achieve the financial goals of the company and the main goal is to earn profits

So, before determining what price you should charge you must incorporate the above mentioned important points. Remember, one of the most important things that makes or breaks a product or service is its pricing. You must make sure that the price you are charging is efficient and is able to help you in achieving your objectives.

The article is written by Ahsan Ayub. Ahsan has been writing articles on different topics including business, marketing, finance, entrepreneurship etc. Besides this, the company offers range of services broadly in the category of Business and IT Solutions.