Microsoft Word marketing doc

Importance of Pricing 
Price is an important element of the marketing mix of a company. It is 
the only element in the marketing-mix that produces revenue, the other 
elements represent costs or expenses. It can be used as a strategic marketing 
variable to meet competition. It is an important weapon in the marketing 
armoury of a company to fight with the competitors. Price is highly perceptible 
to consumers or customers and, therefore, significantly affects their decision to 
buy a product or service. It is a factor that directly determines the volume of 
sales. 
Pricing is an important factor to be taken into consideration and forms 
the basis for the allocation and reallocation of the scarce resources of the 
country to profitable and highly productive projects for achieving higher and 
faster economic development. 

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Pricing is a tool for demand regulation by the management of a company 
which may reduce the price of its product to promote its demand when there is 
surplus production or idle production capacity or may increase the price when 
there is need for discouraging the demand for its product on account of 
interruption of production, leading to scarcity of the product. 
Pricing is an important determinant of the profitability of a company as it 
shapes the sales revenue of the developing countries like ours, where, on 
account of the higher marginal value of money, consumer response to price 
changes is more tangible and quicker. Due to mass poverty, even a small 
reduction in price leads to a substantial increase in the sales in these countries 
with high price-sensitive consumers and buyers. 
Pricing objectives 
The various objectives sought to be realized through pricing are : 
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Profit maximization in the short term. 
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Profit optimization in the long term. 
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A minimum return for target return on investment. 
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A minimum return on sales turnover. 
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Target sales volume. 
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Target market share. 
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Deeper penetration of the market and finding new markets. 
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Target profit on the entire product – line irrespective of profit level 
on individual products. 
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Keeping the competition out, or keeping it under check. 
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Keeping parity with competition. 
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Fast turn around and early cash recovery. 
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Stabilizing prices and margins in the market. 
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Out of the above mentioned basket of objectives, different 
permutations apply to different firms or companies.