Price is defined as the monetary value of something. It also refers to the amount of money needed to purchase an item or service.
In marketing, the process of determining the appropriate price to be charged for a product or service is very important. It will affect how the market will accept the product and how much profit the company can make from marketing the product or service.
Finding the right price ensures that customers stay satisfied while the company maximizes its profit margin. This process in which the price of the product/service is determined is called pricing.
Some of the factors considered for pricing include:
Production cost – The price of the product/service should of course cover production cost including raw materials and operating expenses.
Pricing objectives – The price of the product can change depending on the stage of the overall marketing plan. When a product is introduced for the first time the objective is to entice customers to try out the new product. This is why introductory prices are usually very low.
Zone pricing – The region or area where the product is to be sold should be considered since a region with a more upscale market can mean that the product can be sold at a higher price in that area. This is also true if the area is remote, which means that transportation costs will go up.