Pricing in Marketing Mix: Is it Important?

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We'd like to remind you of our good-old quote by McKinsey & Company,

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"On average, a 1 percent price increase translates into an 8.7 percent increase in operating profits."

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In the basics of business, the 4 elements are the 4Ps of marketing. Earlier, businesses focused on optimising the 3 other Ps. Meanwhile, the 4th- Price factor follows behind. The growth of e-commerce and digitisation made it tougher back then. You will find 5 clear signs that you need to upgrade your pricing process.

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Fast-forward to now. More and more businesses are adopting AI-powered pricing tools. Such pricing systems help you take back control of your prices across any channel. Better yet, advanced pricing systems like Symson help you predict future pricing performance.

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It's no secret that pricing is one of the most important aspects of any marketing mix. After all, it's the only part of the mix that generates revenue! Pricing strategies can make or break a product, so getting them right is essential.

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This blog post will explore the power of pricing in marketing mix. But first, let's cover the basics of the 4ps of the marketing mix.

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‍What is Marketing Mix?

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A marketing mix strategy focuses on the drivers that influence customer buying decisions. It includes the "4Ps" of marketing: Products, Prices, Places and Promotions.

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• Product refers to what the company offers to meet customer needs. This includes features, design, and quality.
• Price is the amount customers pay. This can vary based on strategies and discounts.
• Place describes where and how the company distributes its product. For example, physical stores or online web shops.
• Promotion includes the tactics companies use to advertise and encourage customers to buy.

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Some add People, Processes, and Physical Evidence making them the 7Ps of marketing. These extra Ps focus on customer interactions, delivery systems, and the tangible elements of the product. All factors are capable of boosting the customer experience.

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Let's take a closer look at each "P".

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The Role of Pricing in the Marketing Mix

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We'll discuss how pricing can contribute value to each of the remaining 3 core aspects. When setting prices, businesses have several options to choose from. A business's pricing strategy must align with the marketing goals.

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• One common pricing strategy is skimming. Skimming involves setting a high price for a product or service at first to make a profit. This strategy is often used for new products or services in high demand.

• Another common pricing strategy is penetration pricing. Penetration pricing is setting lower prices for a product/ service to attract customers. This helps increase market share. This strategy is often used when launching a new product or service in a crowded market.

• Businesses also have the option to use dynamic pricing. This involves changing prices based on supply and demand. Dynamic pricing can help companies to optimise profits. How? it helps make higher price recommendations when the demand is high and less when the demand is low.

• Finally, businesses may also use bundled pricing. This involves selling more than one product or service at a discounted price. Bundled pricing can be an effective way to increase sales and attract new customers.

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Product: Pricing in a 'Product' Lifecycle

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Pricing is one of the most important aspects of launching a new product. If you price too high, you may not get the sales you need to make your product profitable. But, if you price too low, you may sell many units but not make enough profit to sustain your business.

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Market maturity is one key factor. If your product is the first of its kind on the market, you'll have more leeway to set a higher price. But, what if there are already similar products in the market? Then, you'll need to be more competitive with your pricing.

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Price elasticity level of a product will impact your prices. So, you need to prepare with a elasticity pricing strategy for those products. This is also the case with price sensitive products. So, the nature of the product matters when setting new prices. In he video below, we share which products are suitable for elasticity pricing strategy:

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Market acceptance is another critical factor. If customers are clamouring for your product, you may be able to charge a premium price. But if customer demand is lukewarm, you'll need to be more aggressive with your pricing. This would help you get people's attention to try your product.

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Finally, technical maturity can also affect pricing. If your product is cutting-edge and uses the latest technology, you may be able to charge a premium price. But, some products may have an older technology. In this case, you'll need to be competitive with your pricing.

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Pricing based on 'Place'

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‍Geographic pricing: Companies set different prices for different regions or geographic areas. This pricing strategy can take advantage of differences in cost, market size, or consumer willingness to pay. For example, a company might charge more for a product in a high-income country than in a low-income country. Or, a company might charge more in a large city than in a small town.

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There are several methods of geographic pricing, including:

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1. Variable-rate pricing is when prices are set based on the specific costs associated with each location. For example, transportation costs might be higher for products shipped to remote areas.

2. Zonal pricing is when there are different prices for different geographical zones. For example, a company might charge different prices for shipping to Europe than it does for shipping to Asia.

3. Tiered pricing is when prices increase as the distance from the point of sale increases. For example, a product might cost $10 if it's shipped within 100 miles of the point of sale. But, $20 if it's shipped 200 miles away.

4. Flexible pricing is when companies offer discounts to customers who buy products from specific locations. For example, a company might offer a 10% discount on all new-store purchases.

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Pricing for online versus in-person stores: Some retailers may charge higher prices for in-store purchases citing rent/processing fees, etc. as reasons.

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Promotion: Choosing which product to promote (Key Value Items)

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To make your pricing strategy effective, you must choose the right product to promote. There are various ways to determine this. Let's see.

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• A traditional approach focuses on key-value items that are essential to customers. Companies lower the prices of certain daily items which are elastic products that they need in their daily life. This attracts more footfall in the store. But, they can raise the prices of inelastic products to balance the margins. The purpose is to lure the customer to the store so there's a chance for them to buy a high-priced item.

• Another approach is to consider seasonal trends and adjust your promotional mix. If you know that demand for your product peaks during the summer months, you may want to focus on your promotions likewise.

• Consider the life cycle stage of your products when making promotional decisions. Let's say you have a new product that you're trying to generate interest in. You may want to focus your promotions on this item to create buzz and drive sales. But, as the product reaches maturity and becomes less popular, you'll need to adjust your promotions to continue driving sales.

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It's essential to understand the strategy behind promoting a product. Developing a well-thought-out promotional mix ensures attractive and competitive pricing to customers.

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How Symson Helps You Capitalize on Pricing in the Marketing Mix

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Pricing is about aligning your pricing with your product, place, and promotion.  A strong pricing strategy is crucial for optimizing the entire marketing mix. Symson helps you achieve this. Here’s how Symson's pricing system covers the pricing of all four key components of the marketing mix:

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1. Product: With Symson, you can tailor your pricing strategy to your product’s unique features and value. You can check your product's elasticity level and price sensitivity level to set new prices after analysis. You can focus on product segmentation to set effective prices.

2. Price: In Symson, you can set pricing strategies and business rules for each product. Symson's solution analyses real-time market data and economic events to recommend new prices. It's an integrated pricing platform that manages all your pricing affairs. So, you can take back control of pricing your products. Likewise, Symson helps you optimise margins while staying competitive.

3. Place: Symson aligns your pricing strategy with your distribution channels. Whether selling online, in retail, or through direct sales, Symson ensures your pricing is competitive. This AI pricing system also helps set the right prices across countries and regions.

4. Promotion: It helps you set strategic promotions based on your goals. Whether it is to increase sales or margin, the price suggestions will act towards that. Now, you don't need to provide discounts on your entire price list. It helps you be surgical when providing discounts. This way you don't lose money while driving more sales.

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