Every business needs to thoroughly analyze every aspect of its operations to stay competitive and be able to offer relevant and innovative solutions to enhance the quality of its goods. When introducing products and services to consumers, companies need to develop a sound pricing strategy to achieve success. Pricing is one of the key elements of the marketing mix, and therefore there are many approaches to addressing it.
Pricing plays a major role in the market mix because it is directly responsible for the ability of the company to generate profit. In other words, the price established by the business will ultimately shape its balance sheet. Additionally, pricing can be a source of potential competitive advantage since it is one of the main tools for attracting customers (Grewal & Levy, 2020). Moreover, companies also need to adjust prices correctly to avoid overpricing, which can prevent consumers from making a purchase.
There can be many approaches to pricing, which translates into different strategies. The first strategy is competition-based pricing which involves a business analyzing the prices of its competitors to establish its own (Ferrell et al., 2021). For instance, businesses can set a price that is lower than that of the competitors. There is also the penetration strategy which implies lowering the price and increasing it after earning a share of a new market (Boone & Kurtz, 2021). Finally, there is value-based pricing which relies on the consumer’s perception of the product’s price. Paintings are usually priced following factors such as the artist’s reputation and cultural significance.
Pricing is an essential element in a marketing mix because it controls how much profit the business will be able to earn. Pricing strategies are diverse, and one of them is the competition-based one which implies assessing the prices charged by other companies on the market. At the same time, there is a penetration strategy extensively utilized by businesses that want to quickly enter a new market.
References
Boone, L., & Kurtz, D. (2021). Contemporary marketing (19th ed.). Cengage.
Ferrell, O., Hartline, M., &, Hochstein, B. (2021). Marketing strategy (8th ed.). Cengage.
Grewal, D., & Levy, M. (2020). M: Marketing (7th ed.). McGraw-Hill.
