What is Pricing?

Pricing means deciding how much to charge for a product or service. It’s the amount of money that a customer needs to pay to buy something.

To set the right price, a business must think about a few important things:

1. Cost of production – How much it costs to make the product.

2. Market demand – How many people want to buy it.

3. Competition – What price other sellers are offering for the same or similar product.

4. Perceived value – How much customers think the product is worth.

Example in Malaysia: Teh Ais at a Café

Imagine a café in Kuala Lumpur is selling Teh Ais.

• The cost to make one glass of Teh Ais (tea, sugar, milk, ice, cup) is RM1.50.

• Many people like to drink Teh Ais, especially on a hot day – this is high demand.

• Other cafés nearby sell Teh Ais for around RM3.00.

• If the café uses nice cups and has a comfortable place to sit, customers may feel the Teh Ais is worth more.

So, the café may decide to sell the Teh Ais at RM3.50.

This price is:

• Enough to cover the cost (RM1.50),

• Competitive,

• And based on what customers are willing to pay.