In the narrowest sense, price is the amount of money charged for a product or a service.
More broadly, price is the sum of all the values that customers give up to gain the benefits
of having or using a product or service. Historically, price has been the major factor affecting
buyer choice. In recent decades, nonprice factors have gained increasing importance.
However, price still remains one of the most important elements that determines a firm’s
market share and profitability.
Price is the only element in the marketing mix that produces revenue; all other elements
represent costs. Price is also one of the most flexible marketing mix elements. Unlike product
features and channel commitments, prices can be changed quickly. At the same time,
pricing is the number-one problem facing many marketing executives, and many companies
do not handle pricing well. Some managers view pricing as a big headache, preferring
instead to focus on other marketing mix elements. However, smart managers treat pricing
as a key strategic tool for creating and capturing customer value. Prices have a direct impact
on a firm’s bottom line. A small percentage improvement in price can generate a large percentage
increase in profitability. More importantly, as part of a company’s overall value
proposition, price plays a key role in creating customer value and building customer relationships.
“Instead of running away from pricing,” says an expert, “savvy marketers are embracing