Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental aspect of financial modeling and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest being cost centers. Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors. The needs of the consumer can be converted into demand only if the consumer has the willingness and capacity to buy the product. Thus pricing is very important in marketing.
A well chosen price should do three things:
achieve the financial goals of the company (e.g., profitability) *
fit the realities of the marketplace (Will customers buy at that price?) *
support a product's positioning and be consistent with the other variables in the marketing mix *
price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product *
price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns *
a low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors From the marketer's point of view, an efficient price is a price that is very close to the maximum that...
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