Is Price the Most Important Factor in the Marketing Mix - Essay Example

Is Price the most important factor in the marketing mix?” Marketing Mix can be termed as a tool used by organizations to progress in their scope of businesses. It not only ascertains the criteria which should be set up for particular product or service but also determines how the criteria should be set upon. It comprises of four Ps which are Product, Place, Price and promotion. These four categories together form the whole Marketing Mix which in turn, if implemented effectively, can make the business successful. It is compulsory for every organization to use four of these approaches effectively to get successful in their businesses. However, Price can be counted in a different category than these approaches. This is because of the nature of the factor price and its effects on the other three Ps of marketing mix. This essay would further describe the marketing mix in terms of all four Ps. And it would conclude as to if the factor of price is very important in the marketing mix. Furthermore it would help the readers to differentiate between the four Ps and tell them about the dependency of the factors on each other (NETMBA, 2007). Marketing Mix is a useful tool used by almost all the organizations in the world to determine and establish their advertising strategy. This advertising strategy further helps the organization to boost up their products and sales. The four Ps of this marketing mix are important ingredients which form it. And it can be said that all the Ps in the marketing mix are dependent on each other. The first P in the marketing mix stands for Product. “The product area is concerned with developing the right product for the target market…(and) may involve a physical good, or service, or blend of both” (Perreault & McCarthy, 2004, p. 38). Product here stands for the goods and services which the organizations offer to their customers. This P tells the organization as to which class of customers would require the product or service and if or not the product would satisfy the needs of the customers. The class of products is also developed in this stage of the marketing mix as to how the product should be established and the exact requirements of the products. This stage in the marketing mix tells the organization how the product should be developed and why it should be developed. The target audience is also selected in this stage. ‘Price’, which is the second stage in the marketing mix, generates revenue for the businesses. “Price setting must consider the kind of competition in the target market and the cost of the whole marketing mix…and must also try to estimate customer reaction to possible prices” (Perreault & McCarthy, 2004, p.40). All the other Ps in the marketing mix are the costs for the businesses however price in the marketing mix helps the businesses to attain a certain income. Price can be set according to the market demand of the product by the organization. If the prices are not set according to the local demand the organization may suffer a loss. However, it is not necessary that lower prices can make the organization suffer in terms of revenue. They can be lowered to lure customers into buying the products and discouraging other similar products given out by the competitors. Price can be termed as a relatively firm point in the marketing mix which determines the relationship between an organization and the customers. Similarly, the third P in the marketing mix stands for Place. “Place is concerned with all the decisions involved in getting the right product to the target market’s place. A product isn’t much good to a customer if it isn’t available when and where it’s wanted” (Perreault & McCarthy, 2004, p.39).This approach of the marketing mix tells the organizations how to place their products according to the market demand. It tells the organization how to get the desired product in the desired market at the right time. The demand and supply is basically met through this type of approach in the marketing mix. The distribution channel is the main strategy which is implemented through this approach of marketing mix. It tells one organization to develop the cheapest and the quickest form of distribution so that the customers can get the right product at the right time and at the right price. For example, the better position of snow skis or snowboards would be in a hilly region for instance Vermont or Colorado. Lastly the fourth P in the marketing mix stands for Promotion. Promotion can also be termed as an important approach of the marketing mix as it promotes certain goods and commodities according to the desired way of the customers. Promotion is a kind of advertising which attracts the customer towards the quality of the product and makes them buy the product. This can be in terms of media advertisement, in crowd advertisement and personal selling. A promoter may make use of television, telephone system, newspapers, the Internet, radio or magazines as a way of advertising. Authors Philip Kotler and Kevin Keller (2006) assert, "A marketer might selectively employ television, radio, and print advertising, public relations and events, and PR and Web site communications so that each contributes on its own as well as improves the effectiveness of others." Promotional plans are aimed by organizations in specific markets where the scope of the product being advertised is the most. Advertising on the television and internet can be termed to be the most effective form of advertisements in the modern world. Where as it can be said that all the four Ps together work towards a better marketing mix, price can be said to be the most important category of the marketing mix. Price is the only category in the whole marketing mix which aims towards the increment of revenue of the organization. Whereas all the other Ps in the marketing mix require a certain amount of revenue to be implemented. Products need to be developed and so they need a certain amount of revenue to be developed, the distribution of these products and the market research of the customer segment also is a lengthy and expensive process (Kyle, 2006). And lastly the promotion costs of the products are also known to be very expensive these days. Advertising of the products has risen up to such levels that at different organizations 4% of the total revenue is allocated to the advertising department of the organization. It is not only the most important factor in the marketing mix but also the most difficult to determine in the whole marketing mix. This is because of the complexity that the pricing stage has, when determining it. Pricing the products should be according to the market demand of the products. It should take in different possibilities of the pricing approach when determining it. These prices should be determined according to the organizations goals and aims. Different pricing strategies also come in way when determining the price of different commodities of the organizations. ‘Penetration pricing’ is introduced by the organizations when they have to increase their sales and market shares and they lower their prices to achieve this target. ‘Skimming pricing’ is another strategy adopted by the organizations which sets higher prices for the initial launches of the products but lowers the prices after a certain time so that the greater share of the market can afford it. This type can help the organizations to attain profits from all the classes of the market. Similarly, competitors should also be taken into notice when setting up prices i.e. a product which has the same quality but higher price than its competitor’s product then it would not be preferred by the market segments. Products of higher quality should be specified higher prices than other products of lower quality. This helps the organization to attract more customers towards it and the benefit that the customers want to buy the best thing increases the revenue of the organization. A lot of products being sold by the organization are sold at a much reduced price than buying the separate products. This type of pricing is known as ‘bundle pricing’. Moreover, at times the organization place the prices of the products $1 less than the significant figure which also helps them to attract customer towards it. This type of pricing is known as the psychological pricing. Lastly the organization tends to sell additional products with the original products and specify an exact price for both of these products. This gives them an edge over other competitors which only offer the desired product without any additional one. This type of pricing is known to be ‘optional pricing’. All these pricing together help the organizations to develop pricing strategies according to the structure of the market. Furthermore the products being sold at the market are usually attracted by the exact prices they are being sold at. And the organizations should have a particular interest in this approach of the marketing mix. Most of the customer segments these days are attracted by the prices at which the products are being sold. And these prices also determine the sales of the products. Furthermore pricing helps to boost the revenue of the organization which can then be used in other Ps of the marketing mix (i.e. in Promotion, Place and Product). This means that all the other Ps of the marketing mix are directly or indirectly dependent upon the factor of pricing. However, on the other side, it can be said the other factors of marketing mix are also important to determine the exact pricing strategy of the organizations. The factor of product helps the organization to use the exact kind of material required in the development of the products. And this material further tells as to how the prices should be set up according to the materials used. Similarly Promotion helps to attract the customers towards the product and buying it accordingly, at times, even when the price is not according to their requirement. Advertisements in televisions and internet also help to see the reaction of the customers in response to the launch of the product. It can tell the organization as to which market is the best suited for the environment of the product launch. Similarly the distribution channel can be termed as a determining factor of the prices of the products. It can be either shortened or widened and the price would be established according to the shortening or widening of the distribution channel. Thus, it shows that the distribution channel is directly affecting the pricing strategies of the organization (Terry, 2008). Organizations are set up to satisfy some needs of the customer with an aim to earn some revenue or goodwill. The first aim of an organization is to judge the requirement of the customers which can be fulfilled by providing a quality service or product. Once the major aim is identified, the organization needs to calculate the total costs required for the production of certain good or for the provision of a certain service. In case of a product, these costs include raw material, labor required for the manufacturing of the product, machinery necessary for its production etc. To understand the requirements of customer and to increase the sales of a product, we use the concept of marketing mix. For example, if a company is making a product let’s say ‘mobile phone’, with a cheap ‘price’ and with a great promotion strategy but it is not distributed properly, it won’t be useful for the company. In this case, customers’ would be willing to buy a product on its existing price but they could not get it on the right time. This would lead towards a failure of the company’s strategy. Likewise, if a company is offering a product at a lower price and made it available for the customers but in order to reduce prices the company has compromised on its quality it may be a threat for the reputation of the company. Moreover, if a company has ‘distributed’ a quality ‘product’ with a reasonable ‘price’ but failed to broadcast it properly, people will probably go for the other product assuming that the new product is unfamiliar and may be low quality wise. It can be said that all the approaches in the marketing mix are interdependent on each other; however the pricing strategy is the most important of all because of its uniqueness in relating to all of them. It tells one organization as to how certain markets should be targeted and how a group of customers should be attracted towards the product. Pricing is the most important element of the marketing mix and should be treated with great care by the organizations. The market mix is planned to facilitate the consumer. Hence, each feature of the marketing mix (4 Ps) has equal significance. While planning the marketing mix all compulsory decisions must be made about the 4 Ps (Perreault, 2004, p. 41). To sum up the marketing mix, a company produces a product to fulfill the requirements and desires of the consumers. It is then decided how the manufactured goods will get to the ultimate consumer. A promotion plan is then chosen to notify the consumer of the product. At last, a price is set up while guaranteeing the business produces revenue. Price is considered to be an important factor because being the final element it may fail the whole plan. If the customer does not agree upon the price then all the efforts would go in vain. Company must also consider the possible reactions of the targeted customers to the prices. In order to persuade customers on buying the product incentives like discounts and offers (like buy 1 get 1 free) must be planned. In conclusion, we can say that price is an important factor of marketing mix but assuming it to be the only important factor would lead to a long-term loss. All 4 Ps of marketing mix carry equal importance and must be given proper attention. Bibliography: Kotler, Philip, and Kevin Lane Keller. Marketing Management. Upper Saddle River, NJ: Pearson Prentice Hall, 2006. Perreault, William D., and E. Jerome McCarthy. Basic Marketing: A Global-Managerial Approach. New York: McGraw-Hill/Irwin, 2004. Grapentine, Terry. "Marketing Mix." Marketing Research : a Quarterly Business Management Publication of the American Marketing Association. 20. 1 (2008): 4. "The 4 New Ps of Marketing." Sales & Marketing Management. 153. 2 (2001): 45. NetMBA. (2007). The marketing mix (The 4 p’s of marketing). Retrieved December 14, 2007, from http://www.netmba.com/marketing/mix/ Kyle, Bobette. Guide to a Profitable Marketing Mix. Retrieved on January 27, 2006 http://www.websitemarketingplan.com/Arts/MarketingMix.htm Read More