Pricing In Marketing

Introduction

Pricing is one of the elements that constitute marketing mix, others being promotion, product, and place. However, the element price seems to be on one side of the marketing mix while the other three on the other side. Product activities involve coming up with items (goods and services) and packaging them to satisfy customers’ needs. Promotion involves communicating or providing useful information about the products a business offers, through activities like advertisements to assist customers make purchasing decisions. The element place consists of methods of making these products available to the end users through activities such as storage and transportation. Unlike pricing, all the three elements focus on creating value for

Although increasing the general prices of commodities might lower the sales volume slightly, the increase in profit generated by high prices will allow the business make up for the lost volume. This is important especially in situations where the business has established some forms of monopoly, whereby increasing the prices of its products has little or no effect on the sales volume. However, in a free market (no barriers to entry for both sellers and buyers) buyers would have the alternative of shifting to the low-priced substitutes. They can also shift to other businesses offering the same products at lower prices. The result is a decrease in sales volume of the business in question, which means less profit due to fixed and overhead costs. On the other hand, lowering the commodity price might result in an increase in profit, especially in elastic markets. In these markets, lowering prices make the sales volume jump significantly, thereby decreasing overhead expenses per unit. However, in inelastic markets, decreasing prices may result in a

There can be no profits without sales. In sales maximization objective, the aim of the company is to generate as much revenue as possible, with no regard to profit maximization. Revenue means the generation of cash flow by a business, through the sale of commodities. When a company is in a financial crisis, it may sell off inventory or drastically lower the prices of its commodities temporarily so it can generate cash as quickly as possible. The revenue generated can be used to settle some short-term bills like payroll. This objective is mainly necessary for short-run since the aim here is not to maximize