The only element within the marketing mix that does not generate cost is pricing. The latter generates revenue. Since the generations of revenue and profit maximization are the key goals of any business establishment, it is important to devise the most effective pricing strategies (Grewal & Levy, 2012). There are five crucial elements that are usually considered when setting the price for goods and services. The five Cs of pricing include competition, costs, company objectives, customers and channel members. The five Cs are indeed important in generating the values required to maximize profits.
Besides the Five Cs, there are four pricing orientations that must be well coordinated in order to boost the performance of an organization. The four alignments include profit orientation, sales orientation, competitor orientation and customer orientation (Grewal & Levy, 2012).
The price and the quantity of products sold share a proportional relationship. The demand for goods and services increases with the rise in prices especially when the supply diminishes. The impact in the change of prices with respect to demand can be measured using the price elasticity of demand. Moreover, effective computation of the break-even point can assist in the process of decision making in organizations.
Price competitive levels can be grouped into four main categories. The four levels are further subdivided into two main phases namely the Less Price Competition and the More Price Competition. Both monopoly and the monopolistic competitions form the Less Price Competition while oligopoly and pure competition account for the More Price Competition (Grewal & Levy, 2012).
From the above summary of the article, it is apparent that pricing is a crucial process in the management of business organizations. As a matter of fact, it is not possible to generate any revenue if the sale of goods and services is not carried out. Better still, adopting a vibrant pricing strategy can directly revamp sales. Needless to say, there are several pricing strategies (apart from the ones discussed in the article) that a business entity can adopt.
Demand and supply are key parameters that govern both the pricing and the accepted market price for goods and services. The relationship between demand for products and the related prices can be analyzed in order to assess the nature of the market at any given time. For most goods, the price of goods and services usually to rise with the increase in their demand level. On the other hand, an increase in supply results into direct drop in the prices for goods and services. Nonetheless, there are other vital marketing mix factors that may alter the demand/supply rules with respect to pricing strategies.
There are a number of pricing models that can be used in setting the price of commodities in the market. However, each pricing model can only be suitable for a particular type of commodity. Therefore, it is necessary for marketing mangers to assess the most suitable pricing models that can improve the volume of sales.
The least expensive options may not necessarily be chosen by a certain segment of the market. For example, it is generally believed that the fall in the pricing of products translates into an increased volume of sales. However, some customers may prefer to buy a more expensive product due to the perception of quality. Cheaper products are generally perceived to be of low quality. Therefore, customers who are after the quality of goods and services are highly likely to disregard the high price.
Reference
Grewal, D & Levy, M. (2012). M: Marketing. New York: McGraw Hill. Web.