Pricing Decision

Price is an element of the marketing mix. As a result, it is a major decision area for marketing management as it is the only element of the marketing mix that produces revenue. This is to say it is through price that the profit maximization objective of marketing is achieved.

It is also true that price means different things to different people; the buyer and the seller inclusive. Different people depending on the transaction that is taking place therefore call it different names. These and other issues affect the marketer as will be seen on in this article.

Meaning of Price

Ordinarily speaking, price is the amount of money that customers pay for product. This definition is deficient
when it is considered that an amount of money is not always involved in an exchange. For example, if somebody offers his shirt for a plate of price, it can be said that there is an exchange for a product (food), but money is not involved but something else (shirt). A better, concept of price is therefore, desirable, which therefore looks at a price from sides of the buyer and seller.

To a buyer, price is the value placed on what is exchanged, however, purchasing power depends on a buyer’s income, credit and wealth. Although, money is the commonest measure of value in today’s business transactions, price does not necessarily involve trading product for product (as in the example given above).

What is important in an exchange is the value, which consumers attach to the item of purchase. Hence the value which consumers are willing to pay depends on the amount of satisfaction or utility they expect to receive from a product. This expected satisfaction will make a consumer pay N50 for a loaf of bread, N2,000 for a pair of Jeans trousers, N400,000 for an imported fairly used car while another consumer will pay N3 million for a brand new car.

Buyers must decide whether the utility derived from a product is worth the buyer power sacrificed or not. The higher the value placed on a product the higher is the price paid for that product and vice versa. This explains why a business or banker is ready to pay between N300,000 and N400,000 on a second hand Mercedez Benz car, while a farmer or distributor will prefer to spend same amount of money on a pick-up or delivery van. This has to do with the relative importance (value) of the item to the buyer.

Price is important to a marketer, as it is an important element of the marketing mix through which he can influence the market. It is mostly flexible and easy for adjustment to suit  the circumstance a marketer finds himself in. price is the only marketing mix variable that can be adjusted quickly to respond to changes in demand or to the actions of competitors. Adjustment takes lengthy process; promotion planning also takes time, same with distribution.