There is often a tendency for marketers to focus more on activities like promotion, product development, and market research while prioritizing their responsibilities. These are often perceived as the more interesting aspects of the product and marketing mix. However, pricing needs to be given its due attention since it has great impact on the rest of the activities and the company. Pricing is of vital importance because of the following reasons.
Pricing as a Flexible Variable
Pricing changes can be made quickly and with almost no lead time if the business needs to make some product positioning changes or to counter a competitor’s activities. In comparison, a change to the product or to a distribution channel can take months and sometimes significant cost inputs. Similarly any promotion decisions will also require additional financial input. Though it is important to plan for pricing changes and their impact on the brand and product perception, this can still be accomplished much faster than any other changes.
Define the Right Pricing
Any pricing decisions for a product need to be made through proper research, analysis and an eye on strategic objectives for the organization and the product. A decision made too quickly with superficial assessment can result in a loss of revenue. A price below the perceived value can lead to both a loss in potential additional revenue and a target audience that judges the quality of the brand through price points. If this price is raised later on, the existing customers may feel like they are being unfairly burdened. A price set too high can result in potential buyers staying away altogether. Pricing is often done by a team of experts who spend time conducting research that considers all variables of the market and brand.
Pricing as a Trigger for First impressions
In some product categories, a consumer will form a perception about its quality and relevance as soon as they see the price. Eventually, the decision to buy or not may be based on the perceived value of the entire product or marketing mix offering. But there is always a danger that the first impression triggered by the price point will either make the rest of the offering irrelevant or it will be a biased assessment.
Pricing as a Key to Sales Promotions
Sales promotions are often a short time price based offering such as a percentage reduction or a two in one type offer. These are meant to generate interest in the product or make use of a special occasion or event. Used wisely, this can be a useful method of increasing sales but the company must avoid the temptation to offer these special prices too often. In this scenario, buyers will put off purchasing the product till the next sales promotion of price reduction.
