In this section we will analyze the price variable as regards marketing. Marketing carries out market researches that provide extremely valuable results to decide what price should be put on a product for it to be successful. The commonest mistake when pricing is adding all the direct and indirect costs of the product’s manufacture and what you want to obtain as a profit. Wrong. You cannot act as if a company were more powerful than the market. As regards prices, mostly, you have to go along with the market. Marketing experts will do a market research to know what the best price for your product is; that is to say, the price will allow a beneficial relationship between the sales quantity and the profit you obtain from them.
The marketing expert will analyze four factors and you should take them into account when pricing ?price of directly competing products (same products), price of complementary products; consumers’ purchasing power, and micro and macro economic conditions.
Price of directly competing products: The price of the products that are similar to the one you offer is a very obvious factor you should bear in mind. If your product costs double in comparison to that of the competitors, it is likely that sales fail, since nobody will want to pay that. However, if you sell it at half the price, nobody will want to buy it because they will assume that as it costs less it is a low quality one. In this and all cases, you should look for balance and analyze the following factors.
Price of complementary products: If the price of the product you offer is too different from the price of the complementary products, most consumers will tend to buy the complementary product. It should be pointed out that complementary products are called in such a way since they truly replace luxury products and cover the same needs. When a consumer chooses a luxury product, he knows he has to pay more for it, but his interest can diminish if there is a great difference as regards price.
The target group’s purchasing power: The price of a product should be in accordance with the purchasing power of the target group. Let’s imagine we are talking about canned tuna. Each company aims at a given target group. The range of people who eats tuna is very wide and with a different purchasing power. If the tuna you offer does not conform to that purchasing power, it will fail. But this does not mean it has to be cheap. If the target group has a high purchasing power, the tuna should not be that economical since they will not want to buy it.
Micro and macro economic conditions: You should make a general evaluation from which to take enlightening results of the current market conditions together with short, medium and large term statistics. As an example we will mention that when the macroeconomic situation is undermined, consumers replace luxury products with complementary ones. By this, we want to point out how important it is that an expert carries out the researches in this area.
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