Pricing Theory and Macroeconomic Factor

0 Comment

Pricing is important in marketing as it determines how a product or service will be accepted in the market. It is one of the most valuable four variables that are used in the marketing mix which are used to develop a business plan. This means that it is central to the operation of a profit-oriented firm. (McNamara 2007, P. 61)
As we have seen, pricing is one of the four factors that are used in the marketing mix of a firm and which is central to the development of a viable business plan. In this regard, pricing is an important aspect of the market which has been as central to marketing. This is because the main aim of marketing is to take the production to as many customers as it can at the most affordable price that they can afford. Therefore the main aim of marketing as defined is to sell as many products as possible.
There are many considerations that have to be made in marketing. In order to reach the target customer, there are a number of consideration that has to be made and the cost of the products as they are being taken to the consumers is one of those important factors that have to be considered. While pricing a product it is useful for any marketing strategy to take into account the cost structure and the willingness of the customers to pay for the product and also look to the effect of the competing from firms which are selling the same products in the same market. Therefore a good marketing strategy is not the one that blankly targets the demand market but it is the one the targets the consumer and also consider the effect of other competitors in the market. In this regard, the competitor and the willingness of the buyers to buy a product at a particular price will have an effect on the overall capability of the firm to sell its products. The firm must also consider the effect of demand dynamics. There are many sources of demand dynamics. One of the factors that affect demand dynamics is dependence effects. This is particular to the inexpensive goods which are frequently purchased by consumers like household goods. For example, if we take an example of Coke and Pepsi drinks, the probability that consumers will purchase any of the product will depend on many factors which are based on preference and loyalty which affects the demand of the product. One consumer may decide to buy Pepsi based on the experience one had on the product the last time it was purchased. On the other hand, one may decide to by Coke as a matter of wanting to experience the difference between the two products. This would be in the spirit of wanting to try something different from the other. In this case, the consumer will be responding to what can be referred to as market activities which are driven by demand dynamics. (Michael 2006, P. 34)
This shows that there are many market activities that are likely to affect the way a company is going to set its price in the market. The choice of brand of a product in the market is likely to be one of the ways in which a firm is likely to set price. For example, in the above-given example, Coke and Pepsi may be coming from the company but in a real sense, they may be retailing at different prices. While both of them are soft drinks, the demand dynamics of the two products will affect the price that will be set for both.