Price should not be used like a simple blunt object
Dr. Brian Monger
Implicit in the argument that price must reflect value is the need for flexibility in the methods used to establish prices. While it may seem obvious to some, a fundamental truism in a market-oriented environment is that “price is a variable.” The opposite of a variable is a constant, something that is unchanging. Many managers approach price as a constant. That is, they set prices using a fixed formula, such as determining cost per unit and adding a predetermined margin to arrive at price. Having applied the formula, they give no further thought to the use of price as a marketing tool. Not only is such an approach naive and overly simplistic, but it causes the manager to lose sight of the real purpose of a price and to miss creative opportunities for realising profits.
Prices can be varied in many ways. The only requirement is creative thinking on the part of the manager. Examples of ten ways to vary a price include the following:
• Keep the same price currently charged but give the customer greater (or lesser) product quality.
• Keep the same price currently charged but give the customer a smaller (or larger) quantity of a particular item.
• Change the time of payment, such as by allowing a customer four months to make payment.
• Offer a rebate or a dollars-off coupon.
• Provide cash, quantity, and/or trade discounts.
• Charge different prices to different types of customers.
• Charge different prices based on the time of day, month, or year.
• Offer to accept a trade-in from the customer.
• Accept partial or full payment in the form of goods and services instead of money.
• Bundle the product with other Products and charge a single price lower than the combined individual prices.
These are but a few of the possibilities. The downside is that price as a variable is a more complicated management task and requires considerably more hard work than does price as a constant or fixed phenomenon. Also, creativity can be dangerous if not properly structured. Pricing decisions should not be made in a piecemeal fashion, but instead should be part of a larger pricing strategy.
Do you have any ideas to add?
Dr Brian Monger is Executive Director of MAANZ International and an internationally known business consultant with over 45 years of experience assisting both large and small companies with their projects. He is also a highly effective and experienced trainer and educator
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