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Price definition marketing

Started by Admin, Sep 20, 2023, 09:28 AM

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Topic keywords [SEO] pricemarketingserviceEquilibratingCompetitive


One of the fundamental terms of economic theory and key concepts of marketing is price. Economists, accountants, buyers and sellers can have different perspectives on what its definition is. Therefore, there is a reason to look closer into what this idea contains and focus on different types and their place in marketing. There are multiple definitions and all of them are correct from different point of views. Unfortunately, academic community has not generated a single comprehensive definition for us to use. However, we still have certain unintentional associations that emerge when we hear the term in everyday situations. We know that price is the cost at which something (one item, one unit of weight or volume) is obtained. Thus, we can articulate the following simple definitions of price:
  • Price is the amount of money which a seller is willing to sell for and a buyer is willing to pay for a unit of goods.
  • Price is a financial compensation which is supposed to be paid in order to obtain a product (service).

It must be said that marketing adopted many other definitions some of which are (admittedly, they have many similarities):
  • Price is the cost expressed as monetary units.
  • Price is monetary form of the value of goods developed as a result of a market exchange.
  • Price is a compromise reached between a buyer and a seller.

According to several researches, consumers from different social groups rank price and quality of a product differently. This means that determining the level of competitiveness requires you to consider various consumer groups and market sectors. If all people were all on the same level, the task would be straightforward. For example, two people live on an island – a fisherman and a craftsman. A fisherman needs a new clay pot and a craftsman wants some food. In such a case, they agreed that they are willing to swap one pot for five fish; as a result, we can tell that one pot costs five fish. If you introduce money into the equation, then the price of one fish is one currency unit and the price of one fish is five units. The concept of price effectively simplifies the process of trade allowing people to use the same language.

Price is one of the most supervised components of the company marketing. If product modernization or an advertising campaign calls for time and resources, if expansion of the distribution network requires a lot of effort, price changes can be done almost instantly and without effort. Other than that, it serves some important purposes and the core functions of the mechanism are:
  • Provision of incentive – it can influence the supply and demand levels and government can eliminate some pricing limitations in certain industries.
  • Equilibrating – ensuring the balance between market mechanisms.
  • Performance measurement – keeping track of expenses, rate of production and sales.
  • Rationing function – national income is distributed among different groups of people, regions and industries. For example, government can make alcohol and tobacco pricier and use the profits to stabilize basic necessities.
  • Transmission of preferences – manufacturers can compare similar products and use pricing as an instrument product positioning.
  • Signaling – a seller signals the market what category goods are allocated for.
  • Competitive – it is one of the basic instruments of a competitive marketplace. Competing businesses can adjust prices based on the laws of supply and demand.