What is Price Mix in Marketing?

Price Mix in Marketing

A sale is likely to occur only if the product is priced fairly, even if it is brilliant, in the right place, with excellent advertising. As a result, one of the most important elements influencing a buyer's choice is pricing. The position of a business might change overnight due to that one factor, which also directly impacts revenues and profits. Adopting pricing selections that are at odds with a firms' competitive approach can be risky. Hence, businesses must approach the price mix with great care and prudence.

Role / Importance of Pricing in Marketing Strategy

Center of an Economy

A planned economy allows resources to be distributed according to predetermined priorities, and price policy is a tool for achieving these aims. Price has an impact on societal living standards because it reduces purchasing power; it controls business profitability and, as a result, allots resources in the best way possible. As a result, it is a potent catalyst for long-term economic growth.

Controls demand

With the help of this effective tool, marketing managers can control product demand. Demand for the products changes depending on price.

In emerging nations where the marginal value of money is higher than that of industrialized nations, price has a specific function to play. It is simple to apply a de-marketing plan to satisfy the growing demand for goods and services.

Competitive weapon

The importance of price as a tool for competition cannot be overstated. Any business, whether it sells high-priced, medium-priced, or low-priced goods, must decide whether its prices will be higher, lower, or the same as those of its rivals. Pricing at each point in the life cycle should reflect the current competitive landscape because the product life span and competitiveness are strongly correlated.

Determinant of profitability

Price serves as the foundation for making profits in the company. Price is a key component of the marketing mix and reflects corporate goals and strategies. Price is frequently used to make up for other marketing mix components' flaws.

Compared to product, channel, personal selling, and sales promotion modifications, price changes can be done more swiftly. Assuming all other factors remain unaltered, the impact of a price increase or decrease is immediately reflected in the growth or decline of product profitability.

Decision input

Numerous and important decisions must be taken in the fields of marketing management. Compared to other business decisions, marketing decisions are more important since they affect other company divisions and are more challenging because the decision-maker must strike at the moving target in a constantly changing marketing environment.

Steps in Formulating Pricing

Identify the Pricing Goal

The targets to be attained through pricing strategies in the marketing plan are referred to as pricing objectives. These should be precisely described in numerical terms so that everyone involved in making pricing decisions may understand them.

The goal can be either of these: survival, maximization of present profit, maximization of market share, or leadership in terms of product quality, depending on the market challenges a company must overcome. These goals may be temporary or permanent.

Establish Costs

Cost and price have a strong relationship. Many businesses make the mistake of failing to base prices on costs because they think that economies of scale will eventually cover them. The pricing plan should carefully take into consideration the costs incurred at various phases of product creation, including services provided by departments other than production such legal consultants, market research, finance, etc., promotion efforts, and inflation.

Determine Demand

Costs determine the lower price limitations, while demand and competition determine the upper price limits. According to the law of demand, the relationship between price and demand is inverse. If all other relevant factors stay constant, an increase in price will result in a fall in demand, and vice versa. Not always, however, is this the case. It is challenging to predict how different price points will be received by customers. Hence, marketers analyse market opportunities and estimate demand using these techniques.

Assess Competition

Some businesses base their prices on those of their rivals. They either set the price higher than, lower than, or on level with the competitors. The industrial structure in which an organisation operates must be studied for this. Regardless of expenditures, they may change the price simply because a rival has done so.

However, they must contrast the product's features with those of equivalent and rival goods. The management should then determine the product's price based on the value and advantages it offers.

Choose a pricing strategy

The organisation starts the price-setting process after analysing Demand, Costs, and Competition. Organizations can select any of the pricing options listed below.

• Cost Oriented Pricing method

• Demand Oriented Pricing method

• Competition Oriented Pricing method

Types of Pricing

Premium Pricing

A "premium strategy" charges a high fee but offers a high-quality good or service in return. Customers feel it is fair to them, which is more significant. This might include meals from Marks & Spencer, fashionable clothing, a Jaguar car, or any number of other things.

Penetration Pricing

The term "penetration" pricing refers to a price approach that purposefully begins by providing "great value." To establish a presence in a market, this is done. using the cost as a key weapon. It might be as a result of rival products having a strong market presence and possibly commanding high costs.

Economy Pricing

Economy pricing is a purposefully low-priced strategy. It's possible that your product or service is "no frills," and the price reflects this. However, it's crucial to settle on a position of the product in the market before it is released. You want your customers to view it in that light.

Price Skimming

If customers don't feel they are getting value, they won't pay. High prices and wide margins, however, are occasionally justified. Reducing prices is undoubtedly simpler than selling them. For products that are just being introduced, a "price skimming" policy is frequently employed. Here, a high starting price provides way to a positive early cash flow that can help cover high development expenditures.

Psychological Pricing

The goal of psychological pricing is to elicit an emotional response from clients rather than a rational one. It is common in the consumer sector and has less applicability in industrial markets. The most prevalent is the use of prices like ?499, which is popular in many retail establishments.

Product Line Pricing

A provider might develop a line of goods with various prices that are acceptable for various consumers. For instance, the price of Cadbury Dairy Milk ranges from ?10 to ?500 where the lower priced ones are for regular customers and highly priced ones i.e. the "Cadbury Celebrations" line, which is typically purchased as gifts.

Pricing Variations

In specific situations, "off-peak" pricing and other variations like early booking discounts, stand-by prices, and group discounts are employed. All of them are well known in the travel industry, but it is also acceptable to employ other prices, like these, in other business ventures.

Conclusion

To sum up, after a product is manufactured, pricing is an essential decision-making factor. The product's price determines its future, the product's acceptance by customers, and the product's return and profitability. Hence, it is a powerful instrument for competition.