Jun 112015

Marketing’s View of Price

We often come across the term price; it’s a common term in everyday life.

In general terms, price can be considered as a monetary amount that is charged in order to get something desired from the market (that is, to obtain a product). If consumers perceive value (enough benefits or a good solution for their needs) for the product at that price, then they are more likely to become customers.

The Role of Price in Communicating Quality

Price is a significant factor in determining the perceived value of the product (or brand) to the consumer. Many consumers equate price with overall product quality – and a more expensive product is generally perceived to be better.

The Role of Price in Profit Generation

Price – along with an appropriate unit margin – are fundamental to delivering the firm’s overall profitability. Price decisions are very important and need to be made in conjunction with the expected sales volume in order to get a good unit margin/sales turnover position.

If the price is too high, then sales will reduce – resulting in less revenue. If prices are too low, there may not be enough margin to contribute significant profits.

The Role of Price in Communicating Value

Consumers become customers if they perceive good value from a potential purchase. Consumers will weigh up the potential benefits against the various costs of acquiring the product. As price is the most significant cost that consumers will consider, then the setting of price at a certain level will influence the perception of value.

For example, if a shop offers small pizzas for sale at $5, then many consumers may perceive value and buy one. But if the shop was to price the same small pizzas at $20, then most consumers would not perceive value and would probably not make a purchase.

Related Topics

Customer value

The marketing mix