Pricing of
Products/Services!!
Hi Guys! Thanks for joining me for another blog on this thing
called Marketing! Let’s get right into it! A big piece of whether a company has
a successful product is the price. If a product has a lower price than of
course that attracts more people to the product, but if it is higher than that
will attract less people depending on their income. There are several factors
that a company looks at while determining the price of their product. These
factors include, profit, sales, market share, unit volume, survival and social
responsibility. If a company if focused on profit than they will set the price
at a level that will draw enough consumers to purchase their product and create
a profit. Let’s look at Ben & Jerry’s, although their main goal and the goal
of any company is to make a profit they have another pricing factor of social responsibility.
With this goal they have to set their price higher to account for all of the
fair trade, organic and non-GMO products that goes into their products.
Another factor that we all probably know about is
competition. If a company has a lot of competition than they will use their
competitors price to help determine the price of their product. There are 4
types of competitive markets, these include: Pure Competition, Monopolistic
Competition, Oligopoly and Pure Monopoly. The one that we as consumer will see
in most of the products we purchase would be monopolistic competition, this is because
in our daily purchases we often find various brands that sell the same product.
For instance, if we look at peanut butter, there are various brands available
for us to purchases even with different types of peanut butter (Organic,
natural, smooth & chunky). The private brands such as Skippy and Jiff
compete with each other in regards to price and advertising to get consumers to
purchase their products and maintain their loyalty.
The major factor that controls the price would be the demand
from us as consumers. If we create a high demand for certain products than the
price will be affected by that. Within consumer demand there are a few factors
that determine our demand. These factors are, consumer tastes, price & availability
of similar products and consumer income. To go back to the idea of competition,
if there are several brands of the same product, with similar taste then
consumers will usually go with the less expensive brand. For instance milk, a
product that generally taste, most consumers (unless they are loyal to a
particular brand) will search for the milk priced the best and purchase that
brand.
So as you probably
already knew, we as consumers play a major role in the pricing of products. If
a product is set too high, we simply do not buy it and soon enough it will
decrease as the company would rather decrease the price as a means to increase
their sales. This is the idea of inelastic demand, when a products price is
decrease by 1% results in a 1% or greater increase in sales. Think of the various
times you’ve visited the store and products have been on sale, like 50% off or
BOGO sales, these are all a way to get consumers to purchase the product so
that the company can increase their sales. There are various aspects to the pricing
concept of marketing that we will have to get into during a later post. Until
next time guys!!
