Price is one of the primary features of the marketing mix that directly affects the business financial performance and in a short run interferes with the firm’s effectiveness. As such, strategic pricing entails significant relations between marketing and other factors of the organization (De Toni et al. 121). However, my friend did not consider the profit element when compensating me for the service offered since most of the services provided even with companies mainly targets creating profit.
Omitted Price Aspect
Based on the case study, my friend incorporated the cost-based pricing strategy to determine the amount to compensate me for the service rendered. Cost-based pricing technique is a form of price development that involves the process of establishing the amount of cost involved in creating a product or service to make a price. For instance, my friend integrated the value of the gas used to drive to the airport and the cost of parking the vehicle. However, he omitted one of the major aspects of the price which is the profitability index. In numerous businesses, profit is the major factor that drives the growth of enterprises (Beredugo, Biobele and Aniebet 25). Profit is achieved when the marginal returns exceed the investment costs in which the client did not factor on when compensating for the service provided. Furthermore, pricing that does not enhance profitability leads to eventual collapse of the business, hence, the importance of understanding the profit margin in establishing prices.
Profitability is the major aspect of numerous businesses in establishing an appropriate price for their products or services. Therefore, poor pricing can lead to the eventual collapse of any given enterprise. As such, my friend omitted the profitability index when compensating for the service offered.
Beredugo, Sunny Biobele1 Etuk, and Aniebet Johnny. “The Effect of Price Harmonization on Profitability of Selected Banks in Cross River State, Nigeria.” European Journal of Accounting Auditing and Finance Research 2.4 (2014): 23-32. www.eajournals.org/wp-content/uploads/The-Effect-of-Price-Harmonization-on-Profitability-of-Selected-Banks-in-Cross-River-State-Nigeria.pdf
De Toni, Deonir, et al. “Pricing Strategies and Levels and Their Impact on Corporate Profitability.” Revista de Administração (São Paulo) 52.2 (2017): 120-133. www.scielo.br/scielo.php?pid=S0080-21072017000200120&script=sci_arttexta