The price is the corresponding price in money that consumers are willing to pay in exchange for a material product or service. According to the economic theories of marketing that are remade to the 4P model, price is a factor determinant to achieve a good position in the market and its determination is due to multiple factors.
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Behold the determining factors when setting the price of our product:
- product question, on which depends the possibility of raising the price; for example, in the face of a price variation in the case of gasoline, the question will remain more constant than in the case of telephone services.
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- prices of similar products, whose analysis is decisive to ensure a market segment since many times the choice end of the consumer focuses precisely on the comparison of the final price between similar products.
- competitive positioning of the product, that determines the quality perceived by potential buyers. If our product is positioned in a high segment of the market, its price must be high to express this quality, but if it is positioned in a low segment the price should be consequently under. This is the case of two successful brands of pens: the Montblanc, for a high market segment, and the Bic, for a low segment.
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- internal costs of the product and profit margin that the company wants to achieve. For example, if the cost of a hair dryer for the company is $ 5 and a 50% profit is required, the final price will be $ 7.5. And if a market analysis shows that some dryers from other brands are selling at a price less than $ 5 for example, the company may adopt different strategies to maintain the attractiveness of its product:
1- can lower production costs
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2- you can lower your profit margin
3- You can keep the price high but investing in campaigns that make your product perceive as superior to others offered in the market.
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Beyond the fundamental variables, there are some strategies that can be taken to achieve a good reception of prices of our merchandise by consumers. Here are the most interesting cases:
- “skimming pricing”, literally skimming price, which is very high and is generally applied to new products to capture the interest of the public, with special reference to pioneer consumers. It is a strategy that works very well with technology products: an example was the very high prices of the first mobile phones in the 1990s.
- the price of penetration it is quite low and is applied when it is necessary to win a good market segment in a short time and attract many consumers by betting on the number of products sold. It is often applied to prepared foods and other products that are sold in supermarkets.
- the discriminatory price, That varies considerably according to the sales channel, the product's manufacture or the quantity that is required to be purchased. An example are the products that can be found in pharmacies and supermarkets, and that are presented with different prices but with fundamentally the same characteristics.
- the hook price, which is considerably low and is applied to attract many consumers to a certain outlet. An example is the “low cost” offers from supermarkets.
