Price is defined as the amount we pay for goods or a service or an idea. Price is the only element in the marketing mix of a firm that generates revenue. The term - Price need not be confused with the term - Pricing. Price is the value that is put to a product or service. But pricing is different from price. It refers to decisions related to fixing the price of a commodity. A pricing strategy takes into account segments, ability to pay, market conditions, competitors price etc while fixing price. It is targeted at the defined customers and against competitors.
Factors determining Fixation of price:
(i) Cost of the product: Cost of the product is the main component of the price. No company can sell its product or service at less than the cost of the product. A Fixed and variable cost are to be considered for determining the price.
(ii) The utility and demand for the product: Intensive study for the demand for product and service in the market is to be undertaken before the fixation of the price of the product. If demand is relatively more than supply, higher price can be fixed.
(iii) Extent of competition in the market: It is necessary to take into consideration prices of the product of the competing firms prior to fixing the price. In case of cut throat competition it is desirable to keep price low.
(iv) Government and Legal Regulation: If the price of the commodity and service is to be fixed as per the regulation of the govt., it should also be borne in mind.
(v) Pricing objective: Usually at the time of price fixation a certain amount of profit is added to the cost of the product. Objective is to earn higher profit.
(vi) Marketing method used: Price also influenced by the marketing method used by the company. Example – Commission which is to be paid to the middlemen for the sale of the goods is also added to the price.
