THE MARKETING MIX

The Marketing Mix: Price

The Marketing Mix: Price

Introduction

Price is considered the only factor in the marketing mix that generates revenues for the company. The price of a product or service is an essential determinant of the value of sales of the company in a specified period. However, in the theoretical perspective, price is considered to be discovered by the perception of customers about the product or service (Sethuraman et al., 2001). It is important for an organization to research that who are the target customers of the company, and how it perceives products or services offered by the company (Tellis, 2004).

Discussion

The only element to product revenue in the marketing mix is price; all the others such as promotion, packaging and product represent costs to the company. Price of a product depends on the cost associated with the product (Chen, 2009). If the cost, for producing the product increases the price of the product tends to increase. With intense competition, pricing is a major issue concerning marketers nowadays. As a result, many companies do not handle pricing well. The most common mistakes are listed below (Winer, 1999):

Cost oriented

Changes in market conditions should result in changing price

Entire marketing mix is not involved in pricing

Variation of price with regard to products, and segments is essential.

Factors to determine the price of a product

There are several factors that are necessary to consider while determining a price. Without these factors, it is not viable for an individual or a company to determine the price of the product. The factors are summarized below (Tellis, 2004):

Quality of Product

An important factor in determining the price is the Quality of the Product. Quality Management is an important issue as it increases the customer base or it can decrease the customer base. The Quality of the product should be consistent, and there should not be any variation with the quality (Tellis, 2004). The quality of the product should be verified by qualified professionals as it takes a second to lose a customer, but marketers toil hard to attract one. If the cost of the ingredients rises then decreasing the quality of the product, is not a solution and quality consistency is critical (Winer, 1999).

Gross Margin, Gross Profit and Mark-Up

Gross Margin means that the company needs to study how the retail price is determined. For instance if a canned-food such as fish is costing $5 and the retail price is $6.5 then it is justifiable. The retail price can never be double the price of the product's costing. The same concept can be applied in the fresh-food industry; such as if a bakery is providing its customers with freshly baked biscuits, then the bakery will have the similar pricing strategy of adding the cost with the benefit in the retail price of any of the bakery item (Tellis, 2004).

It is important to note that the margin and mark-ups are very different concepts. It is calculated by gross profit, which is the price of a product ...