What is Price in Marketing?
Price in marketing is generally defined south korea mobile database as the amount of money a customer is willing to pay to obtain the benefits of a product.
This is a simple definition. But let’s go a little deeper: imagine that you are the customer and you ask yourself: what makes me willing to spend a certain amount of money to obtain the benefits of a product?
The fact is that price has been the main determinant of consumer choice.
And with the possibilities opened up by the Internet to consumers, this determinant has intensified.
With the Internet, consumers can:
- instantly compare prices across thousands of sellers;
- get free products;
- customize the offers they are looking for;
- stipulate the price they are willing to pay and find the price they want;
- negotiate prices in online, in-person or auction exchanges.
Thus, several elements define and condition the willingness of customers to spend a certain amount of money to obtain a product.
These elements are very important to take into account when setting the price. Find out about them now!
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What elements should I consider in the pricing process?
The elements that must be taken into account when setting the price of a product are:
1. Costs
Costs mean: expenses you have had until the moment the product reaches the consumer.
These expenses are necessary for the operation of the company, the labor of the workers, the expenses with bureaucracy, taxes, marketing strategies, the raw materials used, that is, items that are directly involved in the production process of the product.
These costs can be fixed or variable. Fixed costs are those that do not change based on the volume produced or sold.
And variable costs are those that vary according to the quantity of the product. These two types of costs must be analyzed when setting the price of a product. This price must cover the fixed and variable costs.
So, for example, if a product cost $100.00 (one hundred dollars) to be produced, the price for which it will be sold on the market must be higher than $100. How much higher? This will depend on the elements below.
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2. Consumers
Another important factor when setting the price of a product is the price range that consumers are willing to pay for this product.
According to marketing experts, consumers’ perception of prices is based on what they consider to be the real price and not the price declared by the person selling the product or service.
Thus, consumers analyse products through reference prices. Consumer reference prices are:
- typical price,
- upper limit price,
- historical price of the competition,
- lower limit price,
- expected future price,
- last price paid
- and fair price (what consumers think the product should cost).
If your product is a new line of kitchen cleaning products, you cannot expect the consumer to be willing to pay $100 for the products.
However, if your product is a new line of luxury perfume, the consumer may question the quality of the product if it costs $100.
Another important aspect of consumer psychology that must be taken into account is price termination.
This is a determining factor in the consumer’s purchasing decision.
According to marketing experts , it is recommended that prices be slightly below a whole number. For example, prices like: $29.99 or $29.50.
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3. Competition
When setting prices, it is important to identify the prices that are being charged by the competition.
From this information, you can find an appropriate pricing strategy to then face the competition.
Information about your competitors’ prices serves, above all, as a parameter for your decisions.
Remember that, although you have the freedom to set the price of your product, it is recommended that it never differ too much from the price of the competition.
4. Macroeconomics
For those in the market, it is very important to monitor macroeconomic variables such as inflation and deflation .
These variables have a direct impact on we don’t have a crystal the costs of a product.
Therefore, it is important to adopt more flexible pricing strategies that allow you to not be surprised by this type of situation.
5. Product life cycle
Every product has a life cycle whose stages are:
1. Development phase.
2. Introduction to the market.
3. Growth.
4. Maturity.
5. Decline.
Pricing must take into account the product’s life cycle . Therefore, the launch price of a product will never be the same as when the product is in the growth and maturity stage.
For each stage, different pricing strategies need to be adopted.
The main pricing strategies are:
Market penetration strategy
This strategy is based on setting a lower price for the product than the rest of the competition. This makes the product more attractive to a large part of the target consumers and makes it more effective in entering this market niche.
A word of caution! This strategy is advisable and effective only when there is already a lot of competition in the market and price can be a factor in consumer decision-making.
Pricing Description Strategy
This strategy consists of setting the highest price that the market is willing to pay for the product.
Therefore, the first to have access to the product are those who have the financial means to purchase it.
Over time, the price of the product is reduced so that other people have access to it.
This strategy is widely used in pricing electronic products such as cell phones, tablets, etc.
Prestige pricing strategy
This strategy consists of setting the highest possible cmb directory price for the product. This strategy seeks to convey to the customer the feeling of belonging to a select group in society.
As it is a high-priced product, to which few have access, its acquisition represents for the consumer a pattern of consumption and a high social status.
The main aspects of price in marketing that must be taken into account are: target consumer, costs, competition, macroeconomic variables and product life cycle.
If you want to know more about the other 3P’s of marketing, read our article on the 4P’s of marketing .