Pricing Decisions

When a company is looking to price a product, there are several factors that should be considered. As price is one of the most important influences on whether or not a customer purchases a product or not, a proper price must me set. There are 8 factors that influence the price including: organizational and marketing objectives, pricing objectives, costs, channel member expectations, customer interpretation and response, competition, legal and regulatory issues, and the other marketing mix variables. I will focus on 2 of what I think are the most important factors.

Costs for a company are extremely important when pricing a product. In the long-run, a company cannot survive if they sell their product below the cost to make it. A marketer should carefully look at all costs associated with the product, so that they are included in the price. In order to keep prices low, many marketers look to reduce costs of making the product, especially in the electronic and computer industry where prices can become very high. Marketers often look at all the costs involved in making a product and view that as the price floor for the customer.

I also believe that the competition's prices can play a large role when setting the price of a product. If a company does not have a similar price for a very similar product, they will not be very successful. This does not mean that the company has to exactly match the competitors' prices, but can prove to be a successful survival strategy. Often times some companies will raise their prices much more for high product quality or extra features, but usually similar products are similarly priced. Marketers must also try to anticipate how competitors will respond to changes in price. If the competitor also lowers or raises a price to a cheaper list price than yours, they may sell more of that product. Competition is a factor that marketers must constantly be analyzing and scanning for any clue as to how to gain a competitive advantage.

What factor affecting price do you think is most important? Is there a most important one? Why?

In response to Mallory's post...

In Mallory's post on product differentiation, she posed the question: "What do you think is more important, quality and design or customer services of a product? What supports your choice?"

Although I think that both quality and design and customer services are extremely important, for me, it is contingent on what product I am buying. Quality and design are naturally very important because you want to ensure that you are getting a product that is going to perform all the tasks that you want it to, while being easy to use at the same time. I believe that quality and design are very important in electronics, appliances, and other more expensive items. Since these products cost a lot of money, a customer will expect to receive a high quality product that has an easy to use design.

Customer service is also an important aspect in deciding what company to buy from, as a customer should expect the employees to be amicable and help them out when they have a question or concern. Also, customer service is very important after the purchase. If a customer has concerns, problems, or questions about a product or service, then the company should be there to assist at all times. I believe when it comes to services and products that are not purchased often (e.g. cars, houses, and other large purchases) customer service may be more important pre-purchase. Of course quality and design are extremely important here too, before the purchase, the customer will need a high level of customer service, so they can learn more about the product they are thinking of buying.

So, although both quality and design and customer service are both extremely important, I believe that which is more important may depend on the customer and what product is being purchased. Do you think that one is ever more important than the other? Or are they equally important?

Brand Equity

When branding a product, it is very important to have a lot of value in the brand strength in the market. Having a quality brand name is key in maintaining a successful business operation. The more well-managed a brand is, the more of an asset it is to the organization, and this is called brand equity. There are 4 main elements that contribute to brand equity: brand name awareness, brand loyalty, perceived brand quality, and brand associations.

Brand name awareness is very important for a company because the more familiar a customer is with a product, the more likely they are to purchase that product of a competitors'. For example, a customer is more likely to buy a Coke or Pepsi product because they are very familiar with both companies and have most likely grown up watching a plethora of celebrities endorse both products. I believe this also ties in with brand loyalty, since the more familiar a customer is with a product and they more likely they are to buy it and enjoy it, the more they will become loyal to the company. If a customer enjoys a product a lot and feels that they are getting a good deal on the product, they are probably likely to become brand loyal. Many people are brand loyal to Coke over Pepsi, or vice versa, based on taste.

Coke and Pepsi can also be applied to perceived brand quality because they have been around for a very long time and continue to each own a huge percentage of the soft drink market share. The high quality soda that they deliver keeps customers coming back to buy more and more of their drinks. The reason many customers continue to buy a product could be because of a brand association. Many people grew up drinking Coke or Pepsi and every time they sip one, it reminds them of their childhood or another fond memory that makes them happy. This could be why brand association can be so important. Do you think any factor is more important than another? Why or why not?

In response to Michelle's post...

In Michelle's recent post about branding, she said: "I believe that if you find a brand that you like (weather it is with shoes, clothing, or even food) you stick with it because it is safe and reliable. What brands do you stick with?"

I completely agree with Michelle in that if you find a product brand that you like, you are more likely to stick with it. This is not to say that that will be the only company I ever buy from, but it means that between that company and another at a given price for a similar product, I would go with the company that I enjoy and because I have had good experiences with in the past and that I know is safe and reliable. One of my favorite foods is peanut butter. I put peanut butter on many things and find it goes great with a myriad of food. I used to only buy Skippy peanut butter, as it was on the cheaper side and was convenient and found everywhere. A couple of years ago I decided to try an all natural peanut butter, and saw Teddie brand. Ever since I bought that peanut butter, I have never bought another brand. I think it is more delicious, has more flavor, is more healthy, and only has one ingredient. I know this brand is safe and reliable to give me high quality peanut butter every time, so I stick with Teddie.

I also like to stick with Google products. I have always used the Google search for anything I needed to look up, and due to my success with the search, I have began using its other products. I recently began using Chrome instead of Internet Explorer, Picasa instead of Microsoft Photo editor, and Google maps instead of MapQuest. I have had great success with these products and will continue to stick with Google for any other products they may come out with. I believe that having a good, recognizable brand name with the reputation to back it up plays a crucial role in using a company's product. Do you agree with me and Michelle in that many consumers have brand loyalty and stick with a particular company?

Product Pricing

The price of a product may be one of the most influential decisions that a consumer has to decide on when buying a product. Although it may not be the first thing that a customer sees (as the product is usually first), it is often the last thing a customer sees before deciding whether or not to purchase a product. First, a customer will decide if they like the product by looking at the product, the colors, the features, and benefits or extras that may come with it. After a customer decides that they like the product enough to buy it, they will look at the price and make a final decision at whether the price listed is a price that id fair, they are willing to pay, and have the ability to pay.

Much goes into the price of a product, rather than simply supply and demand (although this may play a factor). Companies go to great lengths to determine a proper price that will allow them to try and sell more of their product than their competitors. It is very important to know a competitors prices at all times and to know whether or not they may be holding a sale or discount in the future. This will allow the company to adjust their prices so that they do not overcharge and not sell as many products. Sometimes, however, a company will purposely set their prices higher in order to promote high quality. BMW, for example, typically has a higher price tag than most other car makers, such as Ford and GM. This promotes the high quality offered to the consumer, that may be willing to pay more for this car.

Price can play an important, if not final, decision in whether or not a customer buys a product. Do you think price is always an important role? Or does it sometimes not matter? How important is it for a company to scout out competitors prices and adjust as needed?

Product Branding & Logos

I believe that product branding is one of the most important selling points that a company can use for its products. Often times a product's brand name can become so popular that it is used to describe the product. This is the case in Kleenex (instead of tissues), Q-Tip (cotton swab), and some other products as well. This gives these companies a huge market share and allows them to keep profits up through a successful marketing campaign in the past. Consumers are willing to pay more money for these brand names even though they may be no different than a generic brand or another company's identical product.

Brand marks and logos can also be very important in a company's success. I know that many successful companies have very recognizable logos, such as the McDonald's golden arches, the Nike swoosh, and Apple Computer's bitten apple. These logos have been around for a long time and represent success and a familiar sight that allows customers to know that they are purchasing a quality product. Many times on Nike clothes, shoes, equipment, etc, it will only show the swoosh and does not even say Nike on it. On the back of my iPod, it only contains Apple's bitten apple logo and does not say Apple anywhere on the back.

I believe that establishing a recognizable name and logo are crucial for a company's marketing success. The name should be easy to say and have an interesting logo that consumers will be able to notice as the company becomes more popular. Do you think that having a recognizable brand name and logo are important in a company's marketing success? Can you think of any other brand names that are used to describe a product (e.g. Kleenex)? Why do you think many people buy more expensive recognizable brand names?

In response to Kelcy's post...

In Kelcy's comical post, she posed the question:

I think that I would stick with a company, such as Vaseline, that has had a strong reputation and I know will work well. Although Butt-Paste is a brand name that describes exactly what the product will be used for, I don't think that it is a good brand name. This name could cause some controversy and even offend some people and may actually hurt their sales. Since both products are the same price, have the same ingredients, and work just as well, I would have to stick with a brand name that has a good name running.

In my post about product branding, I believe that having a good, catchy, easy-to-say brand name is key in how well the company performs in terms of sales and how easy it will be to market their product. Brand names like Vaseline and Chap-Stick are names that are widely used to describe the product (rather than petroleum jelly and lip balm). This shows that the company is reliable and has been around for a long time, which is why I would choose Vaseline over Butt-Paste and day of the week. Do you think that brand names actually play a role if the product is identical, has the same ingredients, and costs the same?