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Marketing 2018 19th Edition

Marketing 2018 (19th Edition)

Book Edition19th Edition
Author(s)Ferrell, Pride
PublisherCengage Learning
Chapter 19, End of Chapter , Discussion and Review Questions , Exercise 1
Page 620

Why are pricing decisions important to an organization?

Here is a tip:

Pricing helps in determining the value a company will receive by selling its products.


Pricing is one of the key elements of the marketing mix. The success and failure of a product depend highly on correct pricing. 

  • Profits generated by a company depends upon its pricing strategy only. It is the difference between the selling price of the product and the total cost incurred in the manufacturing of the product.
  • Most customers associate the price of a product with its quality. Companies use this assumption to price their products higher than competitors and market their product as having better quality. This way pricing helps companies to generate better profits.
  • Certain industries are very price sensitive where the competition is based on pricing only. Companies tend to use this to gain an advantage over their competitors. They price their products lower than the others. Customers who are looking to save money are attracted to such products.

So, pricing helps companies in gaining market share.

Verified Answer

Pricing decisions are important for an organization in the following ways:

  • The pricing of a product decides the profit margins and revenue of a company.
  • Pricing is used as a measure of quality to influence the customers.
  • Pricing can be used to gain a competitive advantage in the industry.
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