Keyword Concepts: decisions affecting price setting

Pricing: the third element of the marketing mix is an important and complex consideration in formulating the marketing strategy. Yet it is the variable that normally produces the most direct and most rapid change in customer value and competitive impact.

Price setting consists of more than adding a standard mark up to a given cost.

Pricing is one of the marketing mix elements that can be varied to achieve the marketing objective of the firm. Thus a marketer willing to position a product as a high-quality item will sets up a high price to emphasize quality.

The need for price decisions differs for different types of goods and from market to market. In the case of standardized or relatively undifferentiated products, the market sets the price and the seller has little control over the level of prices.

The same happens in situations where the government price controls prevail or prices are fixed through paten-licensing agreements. In setting its pricing policies, the company has two basic choices. It may use the prices as an active instrument for accomplishing market objectives. Or it may consider prices as a static element in business decisions.