Pricing or determination of price is important not only for private firm, it is also equally important for the entire economy. So, the importance of pricing is discussed in view of the entire economic system and private firm.
1. Importance Of Pricing In The Economy
Pricing is very important in the economic system of any country. Pricing is taken as a major function in open market system or free industrial system. Price of a product or services affects wages, cost, interest and profit. So, price of any product affects the price paid for the factors of production such as labor, land, capital and entrepreneurship.
Price affects the production process, allocation of the factors of production and the entire economy. High wages attracts workers, high interest rate attracts capital and high profit motivates business entrepreneurs. As the allocator of scarcely available means, price determines what should be produced and who should get the produced goods or services. In other words, price is very important in determining demand and supply of good or services. So, pricing plays a decisive tole in smooth functioning of free and market-oriented economy.
2. Importance Of Pricing In The Business Firm
Pricing is equally important in each business firm. Among the four Ps of marketing mix, price is the only element from which a business firm gets money.
The price of any product becomes the major determinant of its market demand. Price of the product of any firm influences competitive situation and market share.Similarly, the price directly contributes to the income and net profit of a firm. On the whole among the marketing activities of a firm, pricing is such a sensitive aspect to which the consumers, competitive firms and government are directly concerned.
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3. Importance Of Pricing To Customers
Pricing is beneficial to the customers, besides the concerned firms and the entire economy. Price is important in selecting goods according to the need and financial capacity of consumers. The price makes the customers confident about the quality of the goods they buy. Generally, high price makes the customers perceive good quality of a product. When the price of goods falls down the customers are more attracted towards the goods, and when their income level declines, they like to buy low priced goods. So, price of goods affects customers benefits.
