MARKETING 102: PRICE; A HUGE PART OF MARKETING.

MARKETING 102: PRICE; A HUGE PART OF MARKETING.

A product being good is not enough on its own, it must be good compared with its competitors. Setting a product's price is more than picking a suitable figure out of the air, it is an important element of marketing and needs serious and systematic consideration. Pricing not only affects profits but also affects the image of the product.

A price put out many messages and meaning. It can say something is classy, good quality, and fashionable. Sometimes a low price of a product does not boost the customer confidence because the price has a psychological impact on people. Setting a pricing policy is a crucial part of a marketer’s job and it is not a once and for all decision.

Factors to consider when choosing the price of a product

??Cost: To make a profit, a product must be sold for more than the cost of making and selling it.

??Value: This is obvious to all products but also can relate to circumstances.

??Market decision: one must consider whether demand for a product is increasing or decreasing in a marketplace.

??Consumer preference: The more desirable a product is, the higher the price it can command.

??Competition: Competitor places a high effect on price. One must consider the price set by other competitors in the marketplace.

Price is rarely fixed for long and can be used tactically and creatively as an inherent part of the marketing approach. A systematic approach to making pricing decisions and policy may work best but there is no guaranteed formula for getting it right. To succeed in giving a price to a product two (2) pricing strategies need to be reviewed;

1.?????Skim pricing: this is where a price is set at the top of the acceptable range. It is mostly used on new products in the early stages of its life cycle to recoup the high investments. It is also used to prevent pricing mistakes by setting the price too low.

It is easier to reduce prices than to increase them if the wrong price level is chosen initially.

2.?????Penetration pricing: this is the opposite of skimming pricing. This is so by setting a low price often below the existing range of the competition with the aim of gaining maximum penetration as quickly as possible.

Pricing is an important and creative aspect of a marketing job. Never forget that.

Six (6) steps to set the price of a product

1.?????Carefully establish its marketing objectives such as survival, current profit, maximization, market share leadership, and product leadership.

2.?????Determine the demand schedule which shows the probable quantity purchased per period at alternative price levels. The more inelastic the demand, the higher the company can set its price.

3.?????Estimate how its cost varies at different output levels and with different levels of accelerated production experience.

4.?????Examine competitors’ prices as a basis for positioning your own price.

5.?????Utilize appropriate cost-plus pricing and break-even analysis as a target profit pricing.

6.?????Select its final price, that is express it in the most effective psychological way. Checking that it conforms with company pricing policies.

Note: Pricing is often complex and getting it wrong can damage brand image and business. Also, a price set outside the potential buyer’s acceptable range means LOST SALES which must be avoided.

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