To a manufacturer ,price represents quantity of money(or goods and services in a barter trade) received by the firm or seller .To a customer, it represents sacrifice and hence his perception of the value of the product.
Quantity of Goods in services received by the Buyer
In this equation, both the numerator and the denominator are important for price decisions. Typically ,for example, if the buyer gets 5 kilograms of basmati rice for Rs 125, then to the seller the price is Rs 125 and to, the buyer it is 5 kilograms of basmati rice .The seller can change this ratio of Rs 25 for 1 kg basmati rice in different ways as mentioned below.
(a) Changing the customer’s value perception of the product The seller can change the customer’s value perception of the product by modifying the presentation of theproduc t.For example, a seller ,who has till no9w been marketing basmati rice as a commodity and selling it in bulk to the wholesaler, now decide to clean, pack and brand the product .He also decide to provide a recipe of different pulaos and biryanis and get the true basmati flavor. All this makes the same product look different, and the seller is now investing resources to create a brand equity for his brand of basmati rice .He may charge a premium of a rupee or two per kilogram, but will the customers pay this differential? The answers to that will be in knowing how the customer perceives these changes in the product.
(b) Change the quantity of money or goods and services to be paid by the buyer Another approach is to change the quantity of money or goods and services to be paid for by the buyer .For example ,the buyer has to pay Rs 32.50 per one kilogram of a well-known brand of sunflower edible oil .This firm may offer 5 kilogram pack for just Rs 160 ,thus giving a saving of 50 paise per kilogram. Another approach is to increases or reduce the price per kilogram of edible oil without the customer having to necessarily buy a bigger pack.
(c) Change the quality of Goods and services offered If the quantity ratio does not change but the quality of the goods and services has declined, then for the buyer, the real price has increased and vice-versa
(d) Price changes through changes in sales promotion or discounts to be applied for quantity variation .Sales promotion serves to reduce the actual price by the buyer .So does a discount .This is particularly true if the quantity ratio remains constant.
(e) Changes in any of the following
· Time and place of transfer of ownership
· Place and time of payment
· Acceptable form of payment—like accepting credit cards as a mode of payment. This often provides to the customers four to six weeks( in some cases even more) credit .The customers also, has the option to pay over ten months.
Thus price is a complex decision that has a direct bearing on the company’s profitability and the marketer needs to know the cost function and also the customer perception of his and his competitors’ product value at different price levels
From India, Gurgaon
A value that will purchase a finite quantity, weight, or other measure of a good or service.
As the consideration given in exchange for transfer of ownership, price forms the essential basis of commercial transactions. It may be fixed by a contract, left to be determined by an agreed upon formula at a future date, or discovered or negotiated during the course of dealings between the parties involved.
In commerce, price is determined by what (1) a buyer is willing to pay, (2) a seller is willing to accept, and (3) the competition is allowing to be charged. With product, promotion, and place of marketing mix, it is one of the business variables over which organizations can exercise some degree of control.
It is a criminal offense to manipulate prices in collusion with other suppliers, and to give a misleading indication of price such as charging for items that are reasonably expected to be included in the advertised, list, or quoted price.
Also called sale price and selling price.
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