Importance of Price in the Buying Decision
Price refers to the monetary value of a good, service, or resource established during a transaction. The forces of supply and demand determine the market price of a product or service. The price at which quantity supplied equals quantity demanded is the market price.
Price is an important thing in decision-making once the product is ready /service. Pricing will determine how the product/service will be accepted in the marketplace by the customers. This is also key in determining the profitability of the product. Pricing is a key tool as well that can be used by the competitors to sell more.
When providing a product to a potential client, you must understand what drives a customer’s capacity to make or not go shopping for a choice. So what impacts does price have on shopping decisions? The research of buying behavior displays that 3 easy and basic components are far the maximum influential and meaningful to shoppers. Those 3 basic components are:
- Value and
Quality survives and once in a while prospers in the toughest of economic conditions like many are facing now. High Quality will often call for an excessive Price; however, buyers commonly discover to pay more for Quality because they recognize that quality products will be remaining and perform.
On the other hand, if a person attempts to promote you a 60-inch flat-display TV for $10, couldn’t you think something isn’t proper?
Value is sought by way of maximum buyers. When you hear a chum, neighbor or relative say: “I were given a good deal!” it normally got something of Value for a truthful price. In different words, they were given their money’s worth and maybe more.
Service is more and more essential to consumers these days. Unfortunately, Service that once changed into predicted and sure isn’t constantly available. Ask yourself when you have ever purchased something of a good-sized rate, but the supplier no longer offers vital services together with shipping, installation, or set-up, which you wished or desired. If you paid $2500 for a new fridge, I think you deserve free delivery, installation, and set-up.
So my message is simple: sell Quality, Value, and Service. They all lead to achievement.
So in which does Price in shape within the commercial enterprise? Price or extra accurately Price Strategy is one of the 4 P’s of the Marketing Mix together with Product, Place, and Promotion. As for Price. Employ Bundling.
Pricing is an important decision-making aspect after the product is manufactured. Price determines the product’s future, acceptability of the product to the customers, and return and profitability from the product. It is a tool of competition.
Why Price is Important
Price determines the profits on sales:
Price determines the profits on sales. It is a basis for generating profits. As it is the most flexible of the marketing mix variables, organizations exercise this freedom very often for defensive or offensive pricing strategies.
The wrong price decision can bring about the downfall of a company. Low prices may attract customers initially, but it would be very hard for the company to raise prices on a future date.
Similarly, a very high price will ensure more profit margins but lesser sales. To maintain a balance between profitability and volume of sales, it is important to fix the right price.
Price is a key Element of Marketing Mix:
Price is the most adjustable aspect of the marketing mix. Prices can be changed rapidly, as compared to other elements like product, place, or promotion. Product design or distribution system changes would take a long time to implement.
Bringing about changes in advertisements or promotional activities is also a time-consuming task. But the price is very flexible and can be changed according to the needs of the situation. Therefore, it is a very important component of the marketing mix.
Price is a competitive weapon:
Price as a competitive weapon is of paramount importance. Whether it is selling high or medium- or low-priced merchandise, any company will have to decide whether its prices will be above or equal to or below its competitors.
This is a basic policy issue that affects the entire marketing planning process. Secondly, the price does not stand alone as a device for achieving a competitive advantage.
There are notable differences in the kinds of pricing strategies that should be used in different stages. Since the product life span is directly related to the product’s competitiveness, pricing should reflect prevailing competitive conditions at any point in the life-cycle.
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Price as Sales Promotion Tool
Price, in combination with the promotion, becomes a strong tool for influencing buyers to buy products. It interests the buyers and highlights the image of the brand to increase sales. Sometimes organizations focus on other marketing mix elements by keeping the price constant based on recovering costs at a certain percentage.
Price is the Pivot of an Economy:
In the economic system, price is the mechanism for allocating resources and reflecting the degrees of both risk and competition. In an economy, a particularly free-market economy, and to a less extent in a controlled economy, the resources can be allocated and reallocated by the process of price reduction and price increase.
The price policy is a weapon to realize a planned economy’s goals, where resources can be allocated as per planned priorities.
Price is the prime mover of the economy’s wheels, namely, production, consumption, distribution, and exchange. As price is a sacrifice of purchasing power, it affects society’s living standards; it regulates business profits and allocates the resources for the optimum output and distribution. Thus, it acts as a powerful agent of sustained economic development.
Price Creates First Impression:
Often the price is the first factor a customer notices about a product. While the customer may base his final buying decision on the product’s overall benefits, he is likely to compare the price with the perceived value of the product to evaluate it. After learning about the price, the customers try to learn more about product qualities.
If a product is too high, the customer may lose interest in knowing more. But if he thinks that a product is affordable, he would try to get more information about it. Therefore the price is a critical factor that influences a buyer’s decision.
Price regulates demand:
Any other component does not equal the power of price to produce results in the product-mix marketplace.
It is the greatest and the strongest ‘P’ of the four ‘Ps’ of the mix. The marketing manager can regulate product demand through this powerful instrument. Price increases or decreases the demand for the products. To increase the demand, reduce the price, and increase the price to reduce the demand.
Price has a special role in developing countries where the marginal value of money is higher than those of advanced nations. De-marketing strategy can be easily implemented to meet the rising demand for goods and services.
As an instrument, it is a big gun, and it should be triggered exclusively by those familiar with its possibilities and the dangers involved.
It is so because; the damage done by improper pricing may completely sap the effectiveness of the well-conceived marketing program. It may defame even a good product and fame well a bad product too.