ABSTRACT
Pricing is the only element of the marketing mix to produce a profit. Pricing too low generates losses, insufficient profit margins, and brand damage, but pricing too high undermines sales volumes and total profits. Pricing is therefore a pragmatic balancing act requiring constant research and great awareness of one’s product, customers, and competitors. Prices are usually set by senior management with input from marketing, sales, and finance colleagues. Some multinationals have pricing departments if prices constantly fluctuate in a dynamic market (e.g. petrochemicals). Many consider stock turn rates (i.e. the number of times annually that the entire stock is sold and replaced), return on sales (ROS) (net profit generated by all sales), and return on capital employed), or ROS multiplied by stock turn; some industries have benchmark figures considered acceptable. In B2B sales markets, companies may give salespeople negotiating leeway. Price should be consistent with the other extended marketing mix elements to avoid undermining the brand.
