Essay on Pricing for Success: How to Set Prices for Maximum Growth

Prices are a reflection of the cost of making a product or delivering a service. Prices are one of the most important decisions marketers can make. The price of a product determines the extent to which a business will grow (Syapsan, 2019). On the one hand, pricing too high or too low could cause problems in the sales and revenues of the business. On the other hand, good pricing ensures that the business is on the verge of success. Prices should not reflect the demand for and availability of a product or service more than the value that customers are willing to pay.

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A business can only become profitable if the prices and sales levels set are satisfactory to the supplier. Prices can only be lowered as soon as the supply of a commodity exceeds the demand, and still, a business could remain at a profit. At the same time, prices can be increased as soon as the demand for a commodity exceeds the supply of that product, and at the same time, a business could realize a profit. If the prices reflected the rate at which customers are willing to pay for that commodity or service, the business would be least profitable, and its growth would be halted. Therefore, prices should only be a reflection of delivering a commodity or service to one’s customers.

Prices should reflect the cost of making a product and delivering a service because of the existing competition. Every competitor has their set prices at which they should realize a profit after making or delivering their product (Quaye & Mensah, 2019). Some products are made at premium costs, whereas others only demand a little input. For instance, various tea manufacturing factories have diverse inputs in terms of ingredients. The more expensive the ingredients, the higher the value of the product, and vice versa. If prices would be made to reflect the amount at which customers are willing to pay for a product or a service, various businesses, especially those demanding high input, would struggle to be competent in the competitive market.

Prices should also reflect the cost of making or delivering a product because they are the financial rewards realized after the provision of a product or service. Rewards in business would mean a profit based on the input. When businesses consider prices in accordance with the value that customers are willing to pay, they would have disregarded the rewards for a business. Prices of making or delivering products and services should be aimed at maximizing profitability (Eggert et al., 2018). Many customers are willing to pay any amounts for their packages as their desire for the product influences their buying behaviors. Therefore, it would be important to consider the cost of making a product or delivering service more than what the customers are willing to pay based on the value of that product or service.

Prices of commodities or services should reflect the cost of making a product or delivering service more than the value that customers are willing to pay. More often, businesses set the prices of their goods or services based on demand and availability. It is advantageous to use the pricing strategy because it would be easy to shift between prices favorably. Besides, competition depends on multiple factors other than the prices made for a product or service. Businesses can consider pricing their commodities or services based on the input and effort made more than the prices customers are willing to pay based on value.

References

Eggert, A., Ulaga, W., Frow, P., & Payne, A. (2018). Conceptualizing and communicating value in business markets: From value in exchange to value in use. Industrial Marketing Management, 69, 80-90. https://doi.org/10.1016/j.indmarman.2018.01.018

Quaye, D., & Mensah, I. (2019). Marketing innovation and sustainable competitive advantage of manufacturing SMEs in Ghana. Management Decision, 57(7), 1535-1553. https://doi.org/10.1108/md-08-2017-0784

Syapsan. (2019). The effect of service quality, innovation towards competitive advantages, and sustainable economic growth. Benchmarking: An International Journal, 26(4), 1336-1356. https://doi.org/10.1108/bij-10-2017-0280