![]() ![]() This is an unhealthy sign as commodities are always subject to price fluctuations and price wars. More products and brands will transcend to a commodity situation. ![]() The differentiation among firms on the basis of the product is going to get blunted when technologies get standardised. It has also invest money in new product development.Ħ. With an increase in this rivalry, marketers find that a firm’s cost of operation also increases, as it now has to spend more money to lure customers and middlemen. Inflation affects pricing in two ways:Īs the entry and exit barriers in the industry are lowered the intensity in inter-firm rivalry increases. ![]() It turns in the cast of inflationary economy. The challenge of price management is also higher when the firm realises that there are other firms in the industry that operate at a more efficient level in an inflationary economy. And if it doesn’t increase the price, it incurs a loss. In case it passes the increase in input costs to the customer in the form of a price increase, and there are equally attractive alternatives at lower prices available to him, the firm may lose the customer. Pricing is one of the significant elements of the marketing mix, if late, it has come to occupy the centre stage in marketing wars. ![]() Importance of Pricing – Inflation in the Economy, Mature Products and Markets, Customers Value Perception, Inter-Firm Rivalry and a Few Others However prices should not be fluctuated too frequently to stimulate sales. In case of goods whose demand is price sensitive, even a small reduction in price will lead to higher sales volume. In order to encourage more sales, the marketing manager may reduce the price. Vital Element of Sales Promotion:īeing the most flexible component of marketing mix, price is the most important part of the sales promotion. Therefore price is a critical factor that influences a buyer’s decision. But if he thinks that a product is affordable, then he would try to get more information about it. If a product is priced too high, then the customer may lose interest in knowing more. After learning about the price, the customers try to learn more about the product qualities. While the customer may base his final buying decision on the overall benefits offered by the product, he is likely to compare the price with the perceived value of the product to evaluate it. Often price is the first factor a customer notices about a product. So in order to maintain balance between profitability and volume of sales, it is important to fix the right price. Similarly, a very high price will ensure more profit margins, but lesser sales. Low prices may attract customers in the initial stages, but it would be very hard for the company to raise prices on a future date. It is extremely significant to fix prices at the right level after sufficient market research and evaluation of factors like competitors’ strategies, market conditions, cost of production, etc. The wrong price decision can bring about the downfall of a company. Therefore it is a very important component of marketing mix. But price is very flexible and can be changed according to the needs of the situation. Changes in product design or distribution system would take a long time to be implemented.īringing about changes in advertisements or promotional activities is also a time consuming task. Prices can be changed rapidly, as compared to other elements like product, place or promotion. Price is the most adjustable aspect of the marketing mix. ![]()
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