As technology has advanced, retailers were able to improve their profit margins despite the prevailing competitive environment. They are well aware of their customers’ buying patterns and behavior. They know how to satisfy the needs and wants of their customers while saving a sufficient amount of profit margin for themselves.
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The reason why product based industry is so very well able to understand the psyche of their customers and use it as their own advantage is the availability of sufficient tools and theories to understand the market mechanism and its related variables in detail. They are able to devise business strategies in accordance to their goals and objectives, and implement them effectively. If we glance at the service industry in the very same fashion, it is clearly visible that they are not as comfortable with their customers as product based industry. Though they are available with tools and theories to understand their market as well but it certainly is not in as much detail as product based industries.
Pricing is one of the chief variables of strategic marketing and it has the most significant and direct impact on the sales revenue of any organization, and even then there are a very few conceptual researches making precise suggestions about setting prices. According to a research, pricing of services has been even given lesser attention than product pricing. But since service is becoming gradually more important part of the economy, the need to be aware of more about the pricing of services has developed; banking being the most important. There are two pricing challenges unique to service pricing that services are intangible and irreplaceable. (Rob Docters, 2004). Finch identifies some other including inseparability of production and consumption, heterogeneity and perishability. (J.Howard Finch, 1998) Banking being more complex than other services makes it more interesting and to an extent more troublesome as well. Pricing banking services is an art in itself. Iuliana Cetine (2010), in her research says that for a bank the price is one of the fundamentals of the marketing mix. The prices ought to be in conformity with the other Ps (product, placement, promotion) and they have to not be taken as a merely financial problem, where they are calculated by adding a margin of profit to the estimated costs; pricing is much more to it. Depositing and lending are two core operations for a bank, pricing these deposits and loans can significantly affect the overall performance of banks; but a research shows that banking executives are not very much able to handle pricing so well. Talking about lending in particular, banks usually are not able to convert their goals and objectives into an effective pricing strategy. Many banks still rely on ancient ways of pricing and handling loans.
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