In the pervious part (Importance of Price Strategy – 4Ps of the Marketing Mix (Price : Part 1)) we have learned what is the price and why is it so important for successful marketing campaigns. In that article you saw other problems like what is profit and how is different from revenue. In this section of Price elements within 4Ps of Marketing Mix I will introduce new problems and solutions to them. So without further ado let’s learn more about value or solid Price strategies for successful marketing plan.
Different points of view on Price
To illustrate how complex price decisions are, Lancaster et al (2007) considered three different perspectives on pricing:
- the economist’s
- the accountant’s
- the marketer’s
- and of course the customer’s
The Economist’s view of pricing
In the free market products prices are set by two forces : demand and supply. Price goes up and down until it settles at the point where buyers are prepared to purchase same amount as the seller are prepared to sell.
If the is larger number of buyers than products, the price is going up until buyers fall out of the market and demand equal supply again. On the other hand if there is more products than customers, the price falls until more customers are attracted int the market (Masterson et. al. . 2017)
However in real life suppliers can’t change prices so dynamically. Price is set in advance. But the concept of supply and demand remains useful. Sales are evidence of law of supply and demand, when a company wants to clear out old stock and reduce prices.
The Accountat’s view of pricing
Accountant want to be sure, that price of the product will cover all it costs so the profit will be generated. However it have also some drawbacks :
- sometimes is hard to calculate all costs
- focusing on costs without looking on other elements of marketing mix may lead to ignorance of market powers (example : people are ready to pay more [good brand, excellent marketing campaign was provided etc] , missing good places to sell products , competition may charge massively higher price.
The Customer’s view of pricing
Customer wants best quality at the lowest price. Prince must represent a good value for customer. perceived value = perceived benefits – price
The drawbacks :
- quality have its value. Good quality products cannot be sold at lowest price.
- each person perception of value is different
The Marketer’s view of pricing
They see price as opportunity to gain competitive advantage. They checking how much people are willing to pay and how much competitors are charging for their products.
- They may want to set price lower than the costs of making it.
Price element within Marketing Mix
Goods price must be set to become a products. Price seems to be just a little addition to 4Ps of marketing mix, but it sends and information. Usually it is quality information.
Let’s imagine expensive shop like John Lewis, Debenhams or Harrods . They offer various products. Same type of products we can find in Lidl or Aldi. Which one People do not expect those two to be expensive. Posh shops send message about quality as well as those bit cheaper.
Example of Sainsbury’s campaign with celebrity chef Jamie Oliver and new products line named Taste the Difference. Jamie emphasising high quality products and sophisticated flavours of that promoted line of products. However this was too much for cost-conscious customers of Sainsbury’s as they were being put off int the belief their shopping would be to expensive from now in Sainsbury’s. In the result Jamie Oliver was soon promoting affordable regular family foods in Sainsbury’s TV adverts. (Masterons et. al, 2017).
Objectives in regards of price can be divided in to two main groups:
- financial return – maximising revenue while recovering investment made to sell product ; largely inward-looking
- market-oriented – positioning, image of a brand, building market share, bringing customers to the shops, rewarding customers for brand loyalty ; usually look to the external environment
Some of them are short-term like enticing customers to the shops, other long-term like : maximising revenue. Other can be ethical like government services affordable to target social groups [school dinners, education] . IKEA keeps offering flatpack houses (wooden , small and cheap houses i.e. £35k-40k ) only for people with combined income of under £35k.
More about Price importance in Marketing planning ?
- Importance of Price Strategy – 4Ps of the Marketing Mix (Price : Part 1)
- Pricing Viewpoints – Importance of Price Strategy (Price : Part 2)
- Pricing Techniques – Strategies, Tactics and Methods (Price: Part 3)