Price

Price is the amount charged to customers for a product or service. It is one of the four Ps of the marketing mix, and it is the only one that brings money in: product, promotion and place all cost money to provide.

Price is closely linked to four things:

• Demand — how many customers are willing and able to buy.
• Sales revenue — price multiplied by the quantity sold.
• Profit — what is left of that revenue once costs are paid.
• Perceived value — what customers believe the product is worth, which shapes how the brand is seen.

For example, a skateboard shop charges £60 and sells 200 boards a month, giving revenue of £60 × 200 = £12,000. Dropping the price to £45 might bring in 260 buyers, but that is only £11,700 — more sales, less revenue, and a smaller amount left from each board to cover costs.

Too high or too low

A price that is too high can deter customers and push them towards a cheaper rival, so sales volume falls. A price that is too low earns little from each unit, which may not cover costs and leaves little profit; it can also make customers think the product is cheaply made, which damages brand image.

Factors that shape a price

• Costs of making or supplying the product — the price must cover these if the business is to profit.
• Customers' willingness and ability to pay — a student and a wealthy professional will accept very different prices.
• Competitors' prices — customers compare, so a business needs a reason to charge more.
• Product quality — a well-made, long-lasting item can justify a higher price than a basic one.
• Availability — a product that is scarce or hard to find can carry a high price, while one sold by many rivals has to compete on other features.

Price is only one factor customers weigh up. Quality, customer service, convenience, availability and brand all affect whether someone buys, so a low price alone will not sell a poor product, and a high price can still work if the rest of the mix is strong.