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 FLEXIBILITY
Another pricing decision relates to the extent of price flexibility. A flexible pricing policy means that the price is bid or negotiated separately for each exchange. This is a common practice when selling to organizational markets where each transaction is typically quite large. In such cases, the buyer may initiate the process by asking for bidding on a product or service that meets certain specifications. Alternatively, a buyer may select a supplier and attempt to negotiate the best possible price. Marketing effectiveness in many industrial markets requires a certain amount of price flexibility.