The Influence of Pricing on the Profit of a Firm

...

(Obegmi, 2010) and (Adrian Micu and Angela Luiza Micu, 2006) both cited in their study the most common procedures on pricing such as cost-based pricing which they regarded that there is fallacy and has adverse effect on profit. They also mentioned the customer-driven pricing. According to Micu, the purpose of value based pricing is to price more profitably by capturing more value, not necessarily by making more sales. Lastly, they have considered the policy of letting pricing be dictated by competitive conditions. In this view, pricing is a tool to achieve sales objectives.

Obegmi also included some of the pricing strategies that may be adopted when pricing decision is made. According to him used premium prices when you have advantage for competition for uniqueness. When your new to the market and is trying to gain customer loyalty it would be better to set you prices low to gain market share and raise them later which is known as market penetration. If you started with competitive advantage try skimming by raising the price and lowering it later to remain competitive. Obegmi included the economy pricing. This keeping your price low: keep your cost low to keep your prices low and still turn profit.

It has been said that one of the secrets to business success is pricing your products properly. If you price your products correctly, that can enhance how much you sell, and contribute in creating the foundation for a business that will prosper. However, should you get your pricing strategy wrong, you may then create problems that your business may never be able to overcome? Put differently, inappropriate product pricing is an invitation to business failure, which refers to a company ceasing its operations following its inability to make a profit or to bring in enough revenue to cover its expenses (Irefin et al, 2013).

Irefin et al, concluded it his study that there was a consensus of opinion among them authors that appropriate product pricing is a key management function and an important decision tool in achieving organizational effectiveness. They have found out that for any business to efficient and effective pricing of good or services must be taken seriously. They also considered the importance of appropriate product pricing in achieving effectiveness and efficiency. There was also the need for managers to be strategic in planning even at the small business level. ( Beredugo & Etuk,2014) Profit maximization could be achieved through maintenance of operational efficiency in pricing.

(Iterin et al, 2013),(Obegmi, 2010), (Adrian Micu and Angela Luiza Micu, 2006) etcetera had the same conclusion on good product pricing they all concluded that this affects the profit on an organization positively, and thus when pricing is not effectively fixed, it will impair the profit of an organization.

Thus with the conclusion the authors reached we can ask the question what will happen if one this strategies and factors in determining price fails. Would lower or profit or remains the same.

References :

Beredugo, Sunny and Etuk, Aniebet Johnny 2014. The Effect Of Price Harmonization On Profitability Of Selected Banks In Cross River State, Nigeria Vol.2, No.4, pp.23-32.

Chiliya et al. 2009.The Impact of Marketing Strategies on Small Grocery Shops in South African Township. Vol 3 (3), pp. 070-079, March ,2009.

Irefin, Isaac Adeyemi et al. 2013. Effects of Product Pricing on Business. Vol.3 No. 2; February 2013

Meehan, Julie et al. Pricing and Profitability Management pp.22-26.

Micu, Adrian and Micu, Angela Luiza 2006. Strategic Pricing. Vol. LVIII pp. 43-52.

Obigbemi, Imoleayo Foyeke ( 2010) The Impact of Product Price Changes on the Turnover of Small and Medium Enterprises in Nigeria.