For a buyer 'price' refers to 'what must be given up' for a particular product or service offered by a manufacturer. This is not always a monetary entity. For example, in barter system, a buyer and seller may exchange crops or animals for a particular good. Again, a buyer might have had to pay additional money than what is the original price. For example, a garage had to be built to accommodate a new car. So for this particular buyer the price of the commodity goes up.
From the seller's point of view 'price' is the amount of money generated when his good is sold. This helps in figuring out his profit from the transaction.

If pricing is an important element in calculating profit it should be of no use to non-profit organizations? This is not true as even non-profit organizations need to make some profit for the smooth running of their business. Though the term 'price' is not used but the same concept is used there as well. For example, a non-profit organization may ask its donors to donate more and have their name published in a newspaper or obtain certain other benefits. In this way the donor is giving up money (price) for a value (status enhanced in society). Again price of a commodity should not be confused with its 'value' as they are not the same. From a buyer's perspective, price is only one of the criteria for evaluating a product. A product's price is not its value. A person will not buy a commodity simply because its price is so. He will consider all benefits offered by the product in question along with its price before buying it. For the buyer, the value of a product will change with a change in its price or benefits offered.

Pricing plays a key role in the promotion of a product. In comparison to other marketing activities pricing is the most flexible one. Incorporating a change in the product line of an organization may take years and same will be the case in distribution. An advertisement campaign too once launched cannot be changed too soon. However pricing in comparison is quite flexible. According to the market situation a manufacturer can increase or decrease the price of his product. This change can be a response to a competitor's price alteration. Or it can be brought about to enhance the demand for the product.

Although a buyer does not evaluate a product based on its price alone but it happens to be the first thing about the product that he tries to find out. It can be said that pricing creates the 'first impression' about the product. An over-priced product will make its customer lose interest in learning about its feature along with the idea of buying it. Thus pricing is a very important marketing tool.

Pricing also helps in sales promotion. The price of a product can be lowered for a short period of time to boost its sales. However such changes in price should not be done too often as the customer starts anticipating a fall in price and stops buying the product till the prices drop down again.

Pricing plays an important role in brand positioning. Highlighting the product's unique selling point is a positioning strategy which helps in creating an image and space for the product in the target market segment. This uniqueness can be in terms of quality of product/service or the selling price.

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