Price

Price is what a buyer must give up in exchange for your product or service. Pricing in a competitive environment is both critical and challenging. If you set the price too low, you'll increase unit sales at the expense of profits. If you set it too high, some of your customers will walk into the waiting arms of competitors. Price decisions include price point, list price, discounts, payment period, and so on.
In free and competitive markets, pricing is the linchpin of most transactions. When a customer who wants a product perceives that its value is worth the asking price, a transaction will take place, barring other choices. Thus, moving the price higher or lower regulates the quantity of units sold. This point has implications for the product life cycle. You can price much more aggressively when your product is perceived as new, unique, and without strong substitutes, but you must often reduce your price as substitutes and competitors appear in the maturity stage of the cycle.
Generally, your flexibility in pricing is a function of the uniqueness of your product or service. This is because customers have difficulty in assessing the value of more unique offerings, such as a custom-built guitar or a fully restored 1962 MG sports car.
Some sellers successfully maintain a high price by surrounding their very ordinary products with an aura of uniqueness, quality, or exoticism. This approach is commonplace in, for example, the cosmetics industry.
Wherever you price your product or service, that price is an important element of the marketing mix and will have an impact on your results. You can price for any of the following objectives: to increase unit sales, profits, or market share; to undermine a competitor; or to keep competitors from entering your turf. Successful companies design their new products with specific price targets in mind.