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Understanding the Market — Entrepreneurship STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEntrepreneurshipUnderstanding the Market5 Marks
Question
State the importance of pricing.
✓

Answer

  1. Importance of Pricing: Price is the only element in the marketing mix that produces revenue, the other elements produce cost. Thus, it is essential that we get a good picture of the significance of pricing.
  2. Key to Revenue: Price and sales volume together decide the revenue of any business. As the sales volume in itself is dependent on price, “pricing really becomes the key to revenue of the business”.
  3. Attract Customers: Pricing's power to break customer's brand loyalty by a lower price in the market needs no evidence or elaboration.
  4. Edge Over Competition: Consumers want the maximum quantity at minimum prices. Good quality but at reasonable price is their demand. So it is competition that contributes the maximum to the importance of pricing. It is competition again, that makes pricing a highly dynamic function. And in meeting competition, pricing decisions acquire their real importance.
  5. Crucial to Profits: Pricing is crucial to profits. It is risky area of decision in marketing management. Mistakes in pricing decisions seriously affect the firm's, profits, growth and future.
  6. Platform for Achieving other Objectives: A business firm may have a number of objectives, some short term, some long term, some primary, and some secondary to be attained. This is one of the reasons, why today corporate go in for profit optimization rather than profit maximization (i.e. an optimum level of profit over a long period as a sounder objective of pricing than maximum profit in the short - term).

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