Price is the only element of the marketing mix that produces revenue; all others produce costs.  It is also the most flexible element of the marketing mix.  At the same time, pricing and price competition is a common problem across all food businesses.

The objective of pricing is twofold:

1. to generate sufficient margin to meet the company's financial requirement
2. to pitch the price in the marketplace at a level that will generate sufficient sales

Often these two objectives pull in opposite directions - higher price, lower/less frequent sales.  Pricing management seeks to determine an appropriate price level for each product against what the marketplace will stand i.e. what the consumer is willing to pay.

The Key Determining Factors of Price:

 Pricing Imperatives:

• Price is an important element of the marketing mix and should therefore not be treated in isolation.  Pricing decisions must be coordinated with product design, distribution and promotion decisions.
• Price should be value-orientated and not cost-orientated.
• Price should be varied for different products, market segments and buying occassions.
• Prices should be revised to reflect market changes.