Importance of the pricing:

Pricing is one of the important elements of the marketing mix, but lately, it has come to occupy the centre stage in the marketing wars. The reasons of this are:

1.       Product differentiation getting blunted: as technologies get standardized, differentiation among firms on the basis of the product is going to get blunted. More products and brands will transcend to a commodity situation. This is not a healthy sign as commodities are always subject to price and price wars. For at this stage, the only way to differentiate between brands is the price.

2.       Inter - firm rivalry: the intensity in the Inter - firm rivalry increases as the entry and the exit barriers in the industry are lowered. With an   increase in this rivalry, we find that a firm's cost of operation also increases, as it now has to spend more money to lure customers and middlemen. It has to also invest money in the product development.

3.       Mature products and markets: when the product enter the maturity stage and the market are also mature, the only way  to differentiate the various offers is on the basic of augmented service or price cuts.

4.       Customers value perception: another factor contributing to the importance of pricing decisions is the customer perception of the product current and potential value. To a customer price always represents the products value. Many a time the customer perception of the product value may not necessarily be in line with its price. There are instance in which the product is overpriced when its value perception is lower than the price log on it and vice versa. For a marketer it is important that products are priced at the right level.

5.       Inflation in the economy: price de price of decisions become important in the inflationary economy. Inflation affects pricing in two ways:

• It lowers the purchasing power of the customer and hence a search for low priced substitutes.
• It increases a firm cost because of the inputs costing more thus forcing the price of the product upwards.

6. the firm now finds itself in a dilemma if it passes the increases in input costs to the customer in the form of a price increases and there are equally attractive alternatives at lower prices available to him the firm may lose the customer. And if it doesn't increase the price it incurs a loss. The challenge of price management is also higher when the firm realizes that there are other firms in the industry that operate at a more efficient level in an inflationary economy.