TABLE OF CONTENTS The end price of a company's products or services determines of the amount of money the company can make. Company objectives are guided and influenced by market conditions and price must be a function of such conditions, so the achievement of company objectives often necessitates compromise over the amount of profit that can be realised. The importance of price as a function of the marketing mix varies from market to market, but it is not always the most important factor in the buyer's decision-making process. For the seller, as price determines the amount of profit or loss, it is crucial that pricing is approached in a disciplined and orderly manner. Price provides revenue, whilst other elements of the marketing mix represent costs (see Jobber, 2004, p. 375).
Cost-orientated approaches to pricing are sometimes criticised. This is justified in that costs do not necessarily reflect market conditions or company goals at least in the longer term. Marketing strategies can be designed that put costs into the perspective of a long-range strategic approach. For example, the acquisition of a high market-share may drive down costs in the long term. An image-building strategy might invoke high costs initially, but it allows the company to charge higher prices in the long term. A purely cost-orientated approach to pricing might be too narrow as a basis for pricing. Cost is, however, the logical starting point, and prices charged must ultimately exceed costs if the company is to remain in business. Tellis explains:
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