8.1 The nature of price

Prices are guided and influenced by market conditions, so the achievement of company profit objectives often necessitates compromise over the amount that can be realised. Price is not necessarily the most important factor in the buying decision. For the seller, price determines the amount of profit (or loss), so pricing decisions should be approached in a disciplined manner, for it provides revenue, while the other marketing mix elements represent costs.

Marketing writers criticise cost-orientated approaches to pricing, as costs do not necessarily reflect market conditions – at least in the longer term. Companies can design marketing strategies that put costs into the perspective of a long-range strategic ...

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