What are the advantages and the disadvantages of the pricing strategy?

The marketing mix determines the marketing elements related to selling a product. Marketing mix factors include the product itself, promotion, placement, and price. The price is the most adjustable element of the marketing mix, so the price has a high number of associated strategies. The price of a product communicates the company's intended value of the product. Strategies pricing the product too low or too high can have unintended consequences.

Managers use a combination of strategies to determine product price.

The marketing mix determines the marketing elements related to selling a product. Marketing mix factors include the product itself, promotion, placement, and price. The price is the most adjustable element of the marketing mix, so the price has a high number of associated strategies. The price of a product communicates the company's intended value of the product. Strategies pricing the product too low or too high can have unintended consequences.

Industry Standard and Life-Cycle Pricing: Pricing according to a mix of the cost of producing the product and industry standard is easy, but lacks competitive strategy. The price should be used in conjunction with the other elements of the marketing mix. If a product is supposed to be high-end, it should be priced accordingly. Sometimes, managers make the mistake of leaving the price the same. The price of the product should vary throughout the product's life cycle; the price strategist should set different prices for product introduction, growth, maturity, and decline.

Management Pricing: Some managers assume that consumers who wish to purchase a product would pay whatever the product is priced. Under this line of thought, many managers price the product at what they think it should cost, not what the consumer thinks it should cost. This may lead to a loss in sales because consumers often interpret prices along with past purchasing experiences and information from research.

Consumer-Based Pricing Strategies: Consumers tend to consider prices in terms of what they think the price should be, comparing their perceived price with the actual price. The discrepancy in either direction (too high or too low) may cause the consumer to purchase the product from another company. A consumer-based pricing strategy can be advantageous because it goes inside the mind of the intended consumer to predict what the consumer would be willing to pay for a product. Market research and attention to other elements of the marketing mix help determine the consumer's ideal price.

Pricing According to Demand: Price strategy may also be tied to the economic law of supply and demand. The law of supply and demand states that prices should rise as demand for the product rises. The rise in price leads to a rise in profits, which allows the company to produce more products. The additional products lead to a surplus, the surplus causes prices to fall once more, and the lower prices lead to an increase in demand, starting the cycle over again. Advantages of demand pricing include the ability to optimize prices using charts and mathematics that predict ideal prices. However, demand pricing may lead to revenue loss by failing to take into account variables such as production costs and the consumers desired price.