Why the Right Pricing is Important for a Business 

1. Profitability

What it means:
A good price helps the company make profit. If the price is too low, the company may not cover its costs. If the price is too high, customers might not buy.

Example (Malaysia):
A bakery in Penang sells a cake for RM10. If it costs RM7 to make the cake, the bakery makes RM3 profit. But if they sell it for RM6, they lose money.

2. Market Positioning

What it means:
The price shows the type of product and the type of customer the business wants to attract — luxury or budget.

Example (Malaysia):

• Bonia sets high prices to show it is a luxury brand.

• Mr DIY uses low prices to attract customers who want to save money.
  Each price helps them keep the right image.

3. Customer Perception

What it means:
Customers often judge the quality of a product based on the price.

• Too cheap = might look low quality

• Too expensive = may feel not worth the money

Example (Malaysia):
If a shop sells a pair of shoes for only RM10, some people may think the shoes will break easily.
But if the same shoes are sold for RM50 with good packaging and display, people may see it as better quality.

4. Competitive Advantage

What it means:
A business can compete better if it uses smart pricing. Lowering or adjusting prices can help attract more customers and beat competitors.

Example (Malaysia):
During Ramadan, Giant and Tesco often reduce prices of items like cooking oil or rice. This helps them attract more shoppers than smaller kedai runcit.

5. Sustainability (Long-term survival)

What it means:
The right price helps a business survive for a long time. It helps pay bills, invest in new ideas, and stay strong even when times are tough.

Example (Malaysia):
A small nasi lemak stall in Johor sells at RM2.50 — enough to cover cost and make small profit. Because of the right pricing, the stall can run every day, pay workers, and grow over time.