Establishing Your Price Strategy
Price is often the most difficult portion of the marketing mix to get right. The final price can affect the design, the production, the profit, and your brand image. In deciding how to manage pricing, there are 6 considerations:
Try not to ignore your company’s mission statement when establishing pricing strategies.
For Example, if your mission statement is “To sell stuff to yuppies that will make them feel like more affluent yuppies.” then you may want to set your prices slightly higher than your competitors.
A specific item will often trigger a price in the mind of a consumer. In addition, all of the aspects attributed to your product came at a cost. How much was that, exactly?
Remember, the costs of production determine a base price. From there, an acceptable markup is added, so that the breakeven point and profitability are achieved.
This only works as long as the customer is willing to pay that amount!
Always keep track of the competition. Your position in the market is relative to theirs.
The Complete Marketing Mix (4P’s)
Since the price will influence the other elements, it’s important to anticipate how fluctuations in price will affect them.
For example, lowering the price on Plasma Screen Monitors may increase Demand, which means that the distribution strategy will have to be altered to meet the increase in demand.
On the other hand, increasing the price means that promotional efforts will have to focus on the features / benefits of your product.
Logistics (Marketing Channel Members)
Manufacturers in particular have to be aware of how their price affects wholesalers and retailers. They have to be able to add an appropriate markup without sacrificing their competitive edge.
They will probably expect volume discounts and training support for sales staff as well as a good base price.
(Review Perceived Benefits.)