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What Is the Role of Price in the Marketing Mix?
The role of price in the marketing mix is to define the pricing strategy that will best attract those within the business’s target market. When discussing this issue, the price of the product, discounts, segmentation and financing options are included. Setting a price involves determining what the target market is prepared to pay, the costs to produce the product, and what the competitors charge.
Developing the price section of a company's marketing mix strategy includes conducting research within its target market. The business needs to determine what its customers are willing to pay, which can often be difficult if the product or service is unique or significantly different than what is currently being offered. If this is the case, businesses can use surveys and test marketing techniques to gain insight into what price points are optimal.
The cost of producing the product or service is also included in the price, and it determines the lower limit of which the price can be set. The selling price should always be higher than it costs to make the product in order to make a profit. The marginal profit can be calculated to determine how much in profit is made per item sold.
Components of price in the marketing mix not only include the actual price of the product but also discounts and the availability of financing for customers. For instance, a business may find it better to segment its market to offer different pricing options. This is often done when software companies create home and business versions of their products, for example, with the business version having a higher price point. If the company will offer discounted prices or opportunities for its customers to finance, the details should also be included in the marketing strategy.
Comparing pricing strategies with the competition can also be beneficial. A business should determine on which basis it wants to compete, such as by becoming a price leader, offering the highest quality, or becoming a luxury brand. After determining this, the company should then set its price appropriately in relation to its competitors. For instance, if the business wants to be positioned as having the highest quality, it would not want to sell its product at a cheaper price than others in the market.
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![The role of price in the marketing mix is to define the pricing strategy that will best attract those within the business’s target market.]()
By: juraThe role of price in the marketing mix is to define the pricing strategy that will best attract those within the business’s target market.
Discussion Comments
I've always thought it crazy when people actually want to pay more for a product just because of its brand name. I've even heard of businesses starting out charging high prices in order to attract wealthy customers.
@wavy58 – I feel that way about the oil change place I take my car to. Their prices seemed a little high at first, but after I tried the competition, I realized why.
The cheaper service didn't live up to my expectations. The guy who changed the oil got black hand prints all over my white steering wheel cover, and he let me drive off with a flat tire, too!
So, even though I pay about ten bucks more for an oil change at my regular place, I will never leave them again. They have the quality to back up their prices.
My friend opened a beauty salon a few years ago, and because she was getting her start in a town that already had three salons, she adjusted her prices to compete with them. She offered rates that were about $5 cheaper for every service than those of her competition.
This meant that she had to go without making much money for awhile, but that was okay. She gained a big customer base, and once she had established herself, she was able to raise the prices gradually without people complaining too much.
The thing about service based businesses is that once you find someone who does quality work, you don't want to leave them, even if they raise their prices a little. You trust your stylist with your hair, and you don't want to risk going to someone you don't know and having them mess it up.
Price is a very important factor during tough economic times. It can be very difficult for a luxury brand to get started when no one has the money to spend on it.
If you know that your target market is struggling nationwide, then you will want to offer a reasonable price. You have to estimate what people might be willing to pay, and you have to make sure that's enough to cover your costs and then some.
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