Pricing is one of the most important decisions a marketer must make regarding a product since price plays a crucial role in competitiveness and consumer demand. Marketers must determine price at the initial stage of a product's life and re-evaluate pricing to manage the delicate balance between production and profits.
Pricing strategy refers to method companies use to price their products or services. Almost all companies, large or small, base the price of their products and services on production, labor and advertising expenses and then add on a certain percentage so they can make a profit. There are several different pricing strategies, such as penetration pricing, price skimming, discount pricing, product life cycle pricing and even competitive pricing.