The Importance of Pricing in a Company's Marketing Strategy

When you are in a buying and selling activity, what are the things that are most often discussed by both the seller and the buyer? Precisely! The answer is: Price.

Price is one of the factors that cannot be separated in a buying and selling activity or business. After an item is produced, the next thing to do is determine the price of the item.

Reasons for the Importance of Product Pricing

It is through pricing that the future of a product is determined. Will the product be accepted in the community or how the product can bring benefits to the company. When the price has been agreed upon by the buyer and seller, the transaction can be carried out immediately.

Thus, the price can be regarded as a tool to support product marketing. The following are the reasons for the importance of price in doing business for a product.

1. Price is one of the most flexible elements of marketing

The price adjustment process can be easily carried out, especially when a quick marketing strategy is needed. A number of other marketing strategies, such as changing promotional tricks, sales locations, product design, and distribution systems certainly require a long process. Therefore, the price has advantages in terms of flexibility to be able to adjust to the conditions and needs faced by the company.

2. Pricing must be done correctly

The ease of changing the price of a product, of course, does not allow companies to set prices arbitrarily. Before determining the price, it is necessary to research and evaluate the product to be marketed such as competitor strategy, market situation, production costs, and so on.

Unfounded pricing will cause losses for the company itself. Products with prices that are too low will certainly look attractive to consumers, but can they cover production costs?

On the other hand, a price that is too high will be profitable for the company, but will consumers be attracted? Therefore, determining the price must be done carefully so that profits and sales can run in balance.

3. Price gives the first impression

It is undeniable, price is the first thing that consumers pay attention to. After getting the nominal price, consumers will try to examine how much benefit will be obtained from the product at the price offered. Therefore, the price and quality of a product can not be separated just like that.

Price plays an important role in determining whether a potential buyer decides to transact or not. Sometimes, potential buyers will lose interest in an item if they find out the price is too high. On the other hand, potential buyers will be more interested and find out various product information if they feel that the price offered is reasonable.

4. Price is an important element in the marketing process

To encourage sales, the company may lower the price of its products. In some cases, there is demand for price-sensitive goods. This causes the slightest price change will affect the level of demand. However, price fluctuations that are too frequent can have a bad impact on sales.

Product Pricing Methods in Business

Now that we've talked about the importance of price in a product marketing effort, let's review some of the methods that can be used to determine price!

1. Cost-based pricing

One way to determine the price of goods is based on the cost of production. These production costs can consist of materials, labor, promotion costs, etc. The value of the cost of production is then added to the margin on the expected profit. This method is one of the easiest ways to determine the price of a product.

Behind its convenience, this method is also quite risky. One of the tricks to avoid losses is that the company must be observant enough to see the perceptions of consumers and competitors regarding prices. If this is not done, then the company has the potential to set an inappropriate price and have an impact on sales.

2. Strategic/Competition-based pricing

Pricing through this method is obtained based on research conducted on prices set by competitors. Therefore, price competition will greatly affect consumer interest and choice.

The business world through digital or e-commerce is also increasingly influential, because consumers will very easily get information about products and the various options available. Therefore, companies must be able to take smart steps to attract consumers' attention to the goods or services offered.

3. Value-based pricing

This method is done by providing a price according to the value that consumers feel for your product. The advantage of value-based pricing is that you will provide a price that is considered reasonable and feasible by consumers.

This method can be used when you are marketing a product that is unique and rarely available in the market. To support this, companies must have a strong knowledge base of consumer needs and wants appropriately.