Any price should combine the willingness of the buyer to pay and the company’s production costs, creating a balance between the two sides. Generally, different pricing approaches can be used for various products, and the complementary approach to the goods will change as the market develops. Nevertheless, only by combining these two extremes, the business can both become successful on the market and not harm the wallets of customers.
Prices that are more consistent with the client’s willingness to pay will bring the company a higher profit. Although there is always a chance that a price increase can carry some positive meanings to consumers – for example, that the item is “hot” and represents good value – consumers genuinely dislike higher prices (Kotler & Keller, 2015). When the lower price limit is set above the equilibrium price, the quantity supplied will exceed the amount required, which will lead to an excess of goods. The client will not be able to pay, and the company will make useless products, which will lead to economic collapse. Even though price cuts have a significant positive impact on consumer behavior, this may not be enough to support companies (Ali & Anwar, 2021). Competition, product development, and legal decisions affect the firm’s freedom of action in determining its pricing strategy. Achieving the right match between the firm’s resources and market opportunities allows it to earn higher profits and grow faster than its competitors.
Thus, any price between the client’s desire to pay a certain amount of money for the goods and the company’s production costs will ensure a mutually beneficial exchange. Prices that lean more towards one of the categories can be difficult to hold on to the market. That is why I believe the two strategies need to be competently harmonized in order to get the greatest profit.
References
Ali, B. J., & Anwar, G. (2021). Marketing Strategy: Pricing strategies and its influence on consumer purchasing decision. International journal of Rural Development, Environment and Health Research, 5(2), 26-39.
Kotler, P. & Keller, K. (2015). Marketing Management. Pearson Education.