Pricing the Product
Read this chapter. Pricing is a difficult issue because most products will sell at some volume at just about any price level. Some customers are willing to pay almost any price for a specific product, but how many of those customers exist? Marketers could consider a value-priced model, but this may make the product's price so low that there is no way to profit. One common pricing strategy is known as "the loss leader", which involves selling one product below the cost to manufacture it to get it in customers' hands. They make up for this loss later with complementary goods. This is commonly seen in video game console sales. Console system manufacturers like Sony and Nintendo will price the system below the cost to manufacture it. Consumers adopt the systems due to the attractive price point, and the manufacturer makes up for the initial loss on the system with sales of proprietary accessories and video games.
PRICE DEFINED: THREE DIFFERENT PERSPECTIVES
Although making the pricing decision is usually a marketing decision, making it correctly requires an understanding of both the customer and society's view of price as well. In some respects, price setting is the most important decision made by a business. A price set too low may result in a deficiency in revenues and the demise of the business. A price set too high may result in poor response from customers and, unsurprisingly, the demise of the business. The consequences of a poor pricing decision, therefore, can be dire. We begin our discussion of pricing by considering the perspective of the customer.