ELEMENT OF PRICING 1
Why Pricing is the Most Important Element in the Marketing Mix
Dexter Tyrone Cassell
School of Business, Liberty University
BUSI 745 – Marketing for Competitive Advantage
Dr. Bowery
December 2, 2021
Author Note
I have no known conflict of interest to disclose.
Correspondence concerning this article should be addressed to
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ELEMENT OF PRICING 2
Why Pricing is the Most Important Element in the Marketing Mix
Introduction
With a highly competitive business environment, firms strive hard to find an ideal market
strategy to have a competitive advantage. In any business, one needs a strategy to execute the
marketing mix's 4ps (product, price, place, and promotion) to develop the right marketing
strategy, thus success (Pourdehghan, 2015). Although the 4ps are intertwined to succeed, price is
arguably the most critical pillar of the marketing mix because it dictates its success and profit.
Price is the value customers pay in exchange for the products and services provided by the
company. According to Thabit & Raewf (2018), pricing decisions affect profits rather than costs
and enable a business to exploit market segments, unlike other marketing mix elements. Hence,
marketers must consider price factors like competitors' prices, discounts, terms of sales, and
supply costs before deciding on the price of goods or services.
The Most Flexible Market Mix Variable
Comparing price to other elements of the marketing mix, price is easier to adjust. Firms
can easily adjust prices depending on demand, supply, season, and customer needs. Pourdehghan
(2015) stresses that businesses take a lengthy period to implement changes in the product design
or the distribution system because of the complex market expectations. Also, changing the
advertisements and promotions on TVs is costly and time-consuming. However, the price can be
changed according to market situation needs. This makes it an essential component of the
marketing mix and has a significant impact on marketing effectiveness.
Price Elicits Consumer’s First Impression
Nevertheless, the price creates the first consumer impression, which influences the
customer's purchasing decision. Especially when the cost of living is high, customers are more
ELEMENT OF PRICING 3
likely to compare the price of products with the perceived value for evaluation (Özer & Zheng,
2016). Since most customers have value perception, they link price to the product's value,
influencing their buying decisions. In some instances, the product can be overpriced when its
value perception is lower than the price tag. Then, the customer might lose interest in the product
and go for an affordable one. However, the price can build the product image because some
customers believe that highly priced products have more benefits and value than low-priced
products (Cant et al., 2016). Hence, firms use price in market positioning to establish the brand's
image in consumers' minds, thus including their buying behaviors.
Enhances Sales Promotion
Since price is the most adjustable component of the marketing mix, it plays a significant
role in sales promotion. Companies often reduce prices, give discounts to encourage more sales.
Sales can increase when a small margin reduces goods whose demands are price-sensitive (Cant
et al., 2016). Also, the price enables companies to differentiate their products or brands in the
market. Given the crowded and competitive business environment, brands are looking for unique
ways to differentiate their products to stand out and have a competitive advantage. Hence, the
only effective way to differentiate brands is the price, enhancing success and more profits.
A Tool for Competition
In addition, the economy's success largely depends on the price which decides trading
activities. Usually, the price of products influences profits, interests, wages, rents which are
money paid to the factors of production hence regulating the economy because it influences the
allocation of these factors (Özer & Zheng, 2016). Price determines the future, acceptability, and
profitability of a product. Hence, it is a vital tool in economic growth and competitiveness. The
ELEMENT OF PRICING 4
main objective of any business is to maximize profit, which depends on the product's price in the
market.
Helps to Set the Right Price
Companies also use price to set the right prices. Pourdehghan (2015) explains that
marketers often conduct comprehensive market research, consumer analysis, and strategic
evaluation before setting up the price tag to accrue revenue. Setting prices too low or too high
can make the business lose revenue. Özer & Zheng (2016) explains that sometimes the target
market can be willing to spend more money to acquire the product and setting the price too low
could mean that the firm is missing additional profits if prices are much higher. Additionally,
rising prices could be met by customer resistance and the feeling that the marketer is attempting
to take advantage. Therefore, marketers must ensure that the marketing operating price is not
higher than the maximum retail price to maintain its market position.
Conclusion
Price is an essential element of the marketing mix because it affects revenues rather than
costs. Price is arguably the most critical component during the management and consumer
purchasing decisions. Firms use price to target a particular segment of customers, differentiate
products, and overcome competition. When marketers set a reasonable price and offer value for
money, consumers' decision is highly influenced, thus high sales and revenue. Unlike other
market mix elements, price is the most flexible tool and enables firms to regulate the demand of
products by increasing or reducing it. Consumers often consider price rather than the value
during purchase, and this influences their buying behaviors. Therefore, pricing decisions can
have significant consequences for the organization's success because it determines the profit
margin of products.
ELEMENT OF PRICING 5
References
Cant, M. C., Wiid, J., & Sephapo, C. M. (2016). Key factors influencing pricing strategies for
small business enterprises (SMEs): Are they important? Journal of Applied Business
Research, 32(6), 1737. https://doi.org/10.19030/jabr.v32i6.9820
Ozer, O., & Zheng, Y. (2016). Markdown or everyday low price? the role of behavioral
motives. Management Science, 62(2), 326-346. https://doi.org/10.1287/mnsc.2014.2147
Pourdehghan, A. (2015). The impact of marketing mix elements on brand loyalty: A case study
of mobile phone industry. Marketing and Branding Research, 2(1),
44. https://doi.org/10.19237/MBR.2015.01.04
Thabit, T. H., & Raewf, M. B. (2018). The evaluation of marketing mix elements: A case
study. International Journal of Social Sciences & Educational Studies, 4(4),
100. https://doi.org/10.23918/ijsses.v4i4p100
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