Strategic Role of Price

In some companies,price plays  a dominate role in marketing strategy,whereas,in other situations,price may perform a more passive role.Nevertheless,the strategic role of price is too often not recognized.Pricing plays an important strategic role in marketing strategy.Product quality and features,type of distribution channel,end-users served,and the functions performed by value chain members all help establish a feasible price range.

Price in the Positioning Strategy:

Price is an important part of positioning strategy,and pricing decisions need to be coordinated with decisions for all of the positioning components.Importantly this pricing perspective mandates understanding how pricing is viewed and understood by customers.

1.Product Strategy-

Pricing decisions require analysis of the product mix,branding strategy,and product quality and features to determine the effects of these factors on price strategy.When a single product is involved,the pricing decision is simplified.Yet,in many instances,a line or mix of products must be priced.The prices for products in a line do not necessarily correspond to the cost of each item.

2.Distribution Strategy-

Type of channel,distribution intensity and channel configuration also influence pricing decisions.The functions performed and the motivation of intermediaries need to be considered in setting prices.Value added re-sellers require price margins to pay for their activities and provide incentives to obtain their cooperation.

Pricing Situations:

Pricing strategy requires continuous monitoring because of changing external conditions,the actions of competitors and the opportunities to gain a competitive edge through pricing actions.Various situations require pricing actions such as:

• Deciding how to price a new product or line of products.
• Evaluating the need to adjust price as the product moves through the product life cycle.
• Changing a positioning strategy that calls for modifying the current pricing strategy.
• Deciding how to respond to the pressures of competitive threats.

Role of Pricing:

Prices perform various roles in the marketing program as a signal to the buyer,an instrument of competition a means to improve financial performance,and a substitute for other marketing program functions.

1.Signal to the Buyer-

Price offers a fast and direct way of communicating with the buyer.The price is visible to the buyer and provides a basis of comparison between brands.Price may be used to position the brand as a high quality product or instead to pursue head on competition with another brand.

2.Instrument of Competition-

Price offers a way to quickly attack competitors or alternatively to position a firm away from direct competition.For example,off-price retailers use a low-price strategy against department stores and other retailers.Price strategy is always related to competition whether firms use a higher,,lower or equal price.

3.Improving Financial Performance-

Since prices and costs determine financial performance,pricing strategies need to be assessed as to their estimated impact on the firm's financial performance,both in the short and long run.

4.Marketing Program Considerations-

Prices may substitute for selling effort,advertising and sales promotion.Alternatively,price may be used to reinforce these promotion activities in the marketing program.The role of pricing often depends on how other components in the marketing program are used.

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