4 Roles of the Product Pricing Strategy

Pricing Strategy

Product Prices Perform various functions in the marketing program.

Here are the 4 major roles of “Price” in marketing:

1) Signal To The Buyer – Price offers a fast and very direct way of communicating with your customers. The price is visible to your buyer and provides a basis of comparison between brands. Price also can be used to position your brand as a high quality product.

2) Instrument of Competition - Price offers you a way to quickly attack competitors, or alternatively to position your business away from direct competition.

3) Improving Financial Performance - Because Prices determine financial performance, pricing strategies will impact a business’s financial statements both in the short and long term.

4) Marketing Program Considerations - Prices can also substitute for advertising and sales promotion, in addition to being used to reinforce these activities in the marketing program. For example, pricing strategy can be used as an incentive to channel members as the focus of promotional strategy and as a signal of value.

In deciding the role of pricing in the marketing strategy you must evaluate the importance of prices to competitive positioning, probable customer reaction, financial requirements, and relationships in the marketing mix.