"Discuss the main factors affecting product pricing in the UK".
• Product and price: one of the 7 ps
• Pricing of a product is extremely crucial for a business because “the price of your product can either break or make your business”[i]
• Examples of any 2 companies where pricing has helped in it’s success and other where it has caused a major downfall: Wal-Mart have gained and retained leadership position in its industrysimply because of their unique pricing strategy. They devised a unique pricing strategy that set them apart and gave them competitive edge.[ii]
• There are several factors that need to be taken under consideration before deciding your product pricing strategy.
• Intensity of competition/ type
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One of the most unavoidable factor is the target group. So the product should be higher priced if the target audience is the rich class and priced low if it is designed for lower class of the society. “Example of an entrepreneur that adhered to the “class of targeted customer” factor while devising a product pricing strategy and became extremely successful was Henry Ford, founder of Ford Motor Company. His company’s mission statement was “Democratize the automobile.” Before the coming of Henry Ford, cars were exclusively for the rich. Another entrepreneur that won at the product price level was Sam Walton, founder of Wal-Mart. His adopted product pricing strategy was summed up in the company’s slogan “Always low price.“
Veblen goods: the fact that people get satisfaction from being sen by other people to consume expensive products. The higher the price of the good, the greater will be the demand because it is considered as a status symbol(diagram)
Level and elasticity of demand: This is probably the first factor that would influence the pricing of a product. The higher the demand as compared to the supply, the higher can the price be. Industries often create artificial shortage to maintain a higher price level.
Economic condition like rate of inflation, Recesion(relate it to UK)government policies, taxation rates, etc also have an impact on product pricing.
Location.
Links:
Pricing Objectives involve specifying the role of price in an organization’s marketing and strategic plans. These
Pricing can play an important role in the success or disaster of any product. Too high a price and the product will fail; too low a price and not enough profits will be made to sustain business operations (Hisrich, Peters, & Shepherd, 2014). The key is to make the customer think that they are paying exactly the right price for the product. Anything else though in this regard means the product is not positioned well in the mind of the consumer. First of all, Gril-Kleen will have to decide on what sort of strategy it needs to pursue. This strategy is decided on three factors namely costs, margins and competition.
there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.
When a company is looking at pricing strategy there are the “five Cs of pricing” that a company will examine. The five Cs are, competition, costs, company objectives, customers, and channel member (Grewal & Levy, 2014). Only company objectives, competition, and cost will be reviewed. Company objectives, Target’s slogan of “Expect more. Pay less.” says a lot. It is letting the consumer know that it offers quality products at lower prices. Target is using the competitor
* Long term effects of its pricing strategy (the company may not be able to continue if such pricing structure remains)
Pricing your products is actually one of the hardest decisions for a new business owner to make. Make the prices too high and no one will want to buy. Make the prices too low and you can't make a profit. Not knowing how to price products properly is a common challenge for new business owner. And it is one that can make or break a company.
Pricing is the most important aspect of the marketing mix. Price is the only element of the marketing mix, which produces a turnover for the organization. Pricing plays a crucial role in the product consumption. Pricing products too high or low results in loss of sales for the company. The pricing of each organization based on its corporative objective.
Consumers always base their decisions on price. The price of an item is important as it can influence consumers to purchase the product or not. If a product is out of their price range most people aren’t likely to purchase the product unless
When trying to determine the correct price, a number of factors must be considered: the market and its segments, the size of each segment, the ability to reach each segment, what distribution channels to target, whether to vary price by segment, the usefulness of promotional offerings, and whether the goal is to skim or penetrate each market.
Demand for the product is determined by many factors, like pricing, quality, advertising and distribution.
Today’s highly competitive business world forces companies to create different tactics and relatively rely on multiple pricing strategies to conduct business.
Competition within the industry as well as market supply and demand conditions set the price of products sold.
Price interacts with all other elements of the marketing mix to determine the effectiveness of each and of the whole. The objectives that guide pricing strategy should be a subset of the objectives that guide overall marketing strategy. Thus, it is probably wrong to view price as an independent element of marketing strategy or to assert that price, by itself, is a central element in the marketing mix.” (Webster, 1979)
The process in which organizations determine what they will obtain in exchange for their products is called pricing. Some significant factors for pricing include Market conditions, competition, market place, cost of production and product quality.
Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).