Pricing

In general terms price is a component of an exchange or transaction that takes place between two parties and refers to what must be given up by one party (i.e., buyer) in order to obtain something offered by another party (i.e., seller).  Yet this view of price provides a somewhat limited explanation of what price means to participants in the transaction.  In fact, price means different things to different participants in an exchange:

• Buyers’ View – For those making a purchase, such as final customers, price refers to what must be given up to obtain benefits.  In most cases what is given up is financial consideration (e.g., money) in exchange for acquiring access to a good or service.  But financial consideration is not always what the buyer gives up.  Sometimes in a barter situation a buyer may acquire a product by giving up their own product.  For instance, two farmers may exchange cattle for crops.  Also, as we will discuss below, buyers may also give up other things to acquire the benefits of a product that are not direct financial payments (e.g., time to learn to use the product).
• Sellers’ View - To sellers in a transaction, price reflects the revenue generated for each product sold and, thus, is an important factor in determining profit.  For marketing organizations price also serves as a marketing tool and is a key element in marketing promotions.  For example, most retailers highlight product pricing in their advertising campaigns.

From Knowthis.com