Abstract:

Determination of optimal product prices, including the price for a service, is one of the most complex and demanding management activities undertaken by entrepreneurs. Price is the only marketing instrument that has direct impact on the revenue generated by an enterprise. Other instruments and market-offer elements solely generate costs. In a short time horizon, the impact of price changes on the level of profit and sales is usually greater than the impact of promotional or product-distribution-related activities. What is more, price is an extremely flexible factor. While creation of a new product, introduction of changes to the distribution channels or development of a new market-communication strategy require years, price modifications can be implemented very quickly. Moreover, they do not require any direct investment on the part of the company. Despite such great significance of the price factor, few companies are able to fully use price in the competitive struggle. Most companies do not collect relevant data and do not use price surveys, relying on general assumptions which lead to decisions that are very costly from the perspective of effective business management.