Price in Marketing

Definition of Price

Price is the amount of money that consumers are expected to pay in exchange for a product or service.

It is one factor that shapes consumer perception and purchasing decisions, which ultimately influence a product’s market position and profitability.
Price is also key in determining the revenue and profit of a business.

Cost of production: It involves both fixed and variable costs related to producing and distributing a product or service.
Market demand: Settling on a price that customers are willing and able to pay.
Competition: Prices may be influenced by what competitors charge for similar products or services.
Company objectives: Profit margin goals, market share, and positioning can impact pricing.

Cost-plus pricing: This involves adding a markup percentage to the cost of producing a product.
Penetration pricing: Businesses might set a low initial price to penetrate the market quickly and deeply.
Skimming pricing: Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price.
Competitive pricing: Pricing a product or service at the same level or slightly lower than competitors.
Dynamic pricing: Prices are adjusted based on variables that change in real time, such as demand and supply.

Price Charm: Prices set just below a round number, making them appear significantly cheaper (e.g., £9.99 instead of £10).
Premium Pricing: Higher prices can create an image of superior quality and exclusivity.

Price elasticity of demand helps businesses understand how price changes will impact demand for their product.
When demand is inelastic, a price increase could bring more revenue as consumers are less responsive to price changes.
When demand is elastic, a price drop could increase total revenue, as consumers purchase more when prices are lower.