Marketing Mix: Pricing
Numerous factors influence pricing decision, these factors are well thought-out to be very critical elements in developing marketing strategies. Since price is the building block that determines whether a product will or will not produce revenue, marketing executives need to make use of the information gathering skills and market research when implementing pricing decisions. Several factors influence setting of prices and demand, customer perception and cost of producing the product are just to name a few. Factors Affecting Pricing There are several factors that affect price setting in any given industry.
Some of the factors that affect the pricing decision are; demand, customer perception of product value, cost of producing the product. The market demand for any given product can adversely affect the final price offering. In most instances, the higher the demand the higher the price, however, a product price can be “one that is too high to produce any demand and one that is too low to produce a profit” (Armstrong & Kotler, 2009, p. 259). Different customers perceive the value of a product differently. How one perceives the value will determine the price they would be willing to purchase a product for.
When setting the price of a product one ought to consider how the target customers perceive its value. Besides demand and product value, the cost of producing a product will determine the base market price for that product. This in essence will ensure that the product does not sell at a loss. In our pricing process we considered all the three factors; however, being a new product our main focus was to at least cover the cost of producing our product. Method of pricing For our product the most viable pricing method was the Cost based pricing.
Our main aim was to attain some form of return from our product to cover for the cost of production and a small profit margin. Being a new product in the market we knew that It’s value would take time to be appreciated. We therefore set the market price by “adding a standard markup to the cost of the product” (Armstrong & Kotler, 2009, p. 263). Our percentage markup was based on perceived market demand for the product after careful consideration of the already existing competing products.
Armstrong, G. , Kotler, P. (2009). Marketing: An Introduction. 9th edn. Upper Saddle River, NJ: Prentice Hall. pgs. 256-289.