Explain how pricing is both a business function and a function of marketing. Be sure to explain the focus in each context and how they differ.
Pricing is considered both a business function and a function of marketing because it plays a crucial role in both areas, albeit with slightly different focuses.
As a business function, pricing primarily concerns itself with achieving profitability, generating revenue, and covering costs. The main aim is to set prices that ensure the business's profitability and sustainability, while also considering factors such as production costs, overhead expenses, and desired profit margins. The primary focus in this context is on the financial aspects and feasibility of the pricing strategy, aiming to meet the organization's overall objectives.
On the other hand, pricing as a function of marketing puts emphasis on understanding customer behavior, market dynamics, and competitive positioning. In this context, pricing aims to create value for customers, maximize market share, and achieve strategic objectives. The focus is on finding the optimal pricing strategy that aligns with the target market's perception of value and the company's marketing objectives. Marketing pricing strategies involve studying market segments, conducting competitor analysis, conducting market research, and understanding consumer preferences to set the price that resonates with customers and fulfills their needs, while also considering the business's profitability.
While the business function of pricing primarily focuses on achieving financial targets and profitability, the marketing function of pricing centers around customers and their perception of value. Marketing pricing strategies may involve setting prices higher to communicate higher quality or exclusivity to customers, or lower prices to establish market penetration and capture market share. Marketing-driven pricing also considers factors such as promotional activities, discounts, bundling, and psychological pricing, all aimed at influencing customers' buying behavior and enhancing the overall marketing strategy.
In summary, pricing encompasses both a business function and a function of marketing. The business function primarily focuses on ensuring profitability and financial sustainability, while the marketing function is centered around customers and market dynamics, aiming to create value and achieve marketing objectives.