Pricing
In this edition:-
Pricing
Marketing Tip
Funny Ad
In the current economic environment, many companies are downsizing. Some are saving money through a reduction in staff, others are deleting items from their product lines – generally those that are most costly to manufacture.
This brings me to an interesting dilemma that many companies face and that is price.
What value should we put on our product or service?
Price is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also the most flexible element and can be changed quickly. At the same time, price is the number one problem facing companies. Many do not handle pricing well.
A situation I see on a regular basis is that companies are too quick to reduce their costs in an effort to entice more buyers, rather than convince them their product is worth the higher price. Other problems are, prices that are too cost oriented, not revised frequently enough to reflect market changes and not consistent with the rest of the marketing mix.
Recently I was talking to a woman who sells soap. Her soap is a quality product, using oils from France, hand made, completely organic and smells wonderful. This particular seller has recently reviewed her pricing. The issue was that she was under-pricing her product. Although she was covering costs, the lower price portrayed to buyers that the soap was of an inferior quality when compared to other similar, but higher priced soaps. Buyers expect to pay more for hand made organic soap and by increasing her price she has become consistent with her marketing mix e.g. she is targeting the higher end customers she has in mind when making the soap.
A company can select one or a combination of three general pricing approaches. Cost based pricing – this sets prices based on the seller’s cost structure, Value based pricing – this relies on customer perceptions of value to drive pricing decisions and Competition based pricing, which sets prices based on those of competitors.
Marketing Tip
With the recession bearing down you may find yourself in the position of addressing the price of your product. If so, consider the following.
* Is it going to be costly to change the price? For example, if your product is spread across the country, what costs are involved in making this price change?
* By reducing the cost, will more consumers buy the product, creating more revenue? And if the price is reduced can you still cover your costs?
* If you are thinking of reducing prices to boost sales, first consider what buyers’ reactions might be to a price cut. In some cases they may assume you have reduced the quality of your product and cease to buy it, so that it would be better to maintain your current price.
So – plenty of pricing considerations. Sometimes it can take a couple of attempts to get it right. Generally the best approach is to get your marketing mix right first – that is, target markets, market segmentation etc – then set the price. Good luck and happy pricing.
Link To Funny Ad