Pricing

To sell a product for a particular price, value must be created. Value is the consumer’s estimate of the product’s overall capacity to satisfy his/her needs. When the value placed on a product or service is high, then satisfaction is achieved. Consumers are savvy and will choose based on the level of satisfaction that corresponds with the price. If a bottle of Coca-Cola were priced at $5 while a liter of Pepsi-Cola was priced at $1, it is likely that the sales of Coke would decrease. If these were the only two options at the supermarket, the likelihood of Pepsi sales increasing is high. Pricing is what your customer is willing to trade in return for a product—that is, the value they place on a product or service. Generally, a “price/quality” relationship exists, where the higher the price, the higher the quality; especially in the case of personal services, consumers will expect a higher level of service if the fee associated with that service is higher relative to other providers of similar services.

Marketers may elect to skim the market with a relatively high price at first, and then, as demand wanes at this relatively high price, gradually lower the price. New, innovative products often use this pricing strategy because their newness and uniqueness may enable a higher price at first. As copycats and competitors enter the market, prices will fall to meet the market price.

Some marketers, though, may use a penetration strategy, where the product or service is offered at a very low price, in order to quickly grab market share and be considered the low price provider. WalMart is an example of a company using a penetration pricing strategy. Pricing is a powerful tool in developing a marketing strategy with a strong connection to the financial condition of the organization. Pricing too low may result in economic consequences if costs are not covered, and pricing too high may stunt demand and sales of the product or service, also resulting in adverse economic consequences.

Formulate a Successful Marketing Plan:

How can entrepreneurs use marketing techniques to there best advantage? Consider the following areas and how each can be looked at from a marketing perspective.

1.       Setting Marketing Objectives:

Marketing objectives are likely to be based on as sales revenues and market share. They may also include related objectives such as sales presentations, seminars , ad placement, and proposals submitted to prospective customers.

Entrepreneurs must remember to make all marketing objectives concrete and measurable. Theu should develop the plan so that it can be implemented, not just read. Objectives that cannot be measured , tracked and followed up on are not likely to lead to implementation.

Sales are easy to track and measure. Market share is harder to track and measure because it depends on market research. Other marketing goals, such as positioning or image and awareness, are even less tangible and harder to measure.

2.       Getting the product out: Sales and Distribution:

Entrepreneur must ask themselves how their business will deliver its products or services  to its customers. Will the business employ its own sales force for direct marketing, or will dealers and distributors be used? Have any of these distributors been indentified or selected? On what basis will rely on its own sales force, what skills and training will be required?

3.       Pricing:

Entrepreneurs should consider pricing to be part the overall marketing strategy. Although non-price factors have become more important in buying behavior in recent decades, price still remains one of the most important factors in determining  company market share and profitability. For example, a manufacturer of women’s designer apparel might pursue an initial high-price strategy, and then discount the apparel as a means of generating sales. However, this strategy may risk weakening the image of the upscale brand. Entrepreneurs need to generate a rationale to explain their pricing strategy as well as anticipate its impact on their gross profit. A detailed price list is always helpful, whether the entrepreneur is personally handling the marketing of the product , getting advice from mentors, or outsourcing the marketing to a company the specializes in it.

4.       Raising Visibility: Advertising, Public relations and Promotions.

Many start up or early stage companies do not have a large advertising budget. For these companies, public relations may be the answer. Public relations can play an important role in attempting to generate sales. Usually, the focus is on the concept and creative content of the communication campaign, the media used, and the extent to which each will be employed. Entrepreneurs may contact local media—newspapers, radio, and television—that write or broadcast stories on new business in the community. A favorable response may translate into free advertising to a large audience.

5.       Choosing a site:

In some cases, particularly of the business has a retail focus, entrepreneurs must take the location into the account in the marketing plan. Entrepreneurs must think about the demographics and educational issues of the neighborhood ; its environment , accessibility, and proximity to other businesses; and cost of maintaining a facility here.

6.       Determining Future Marketing Activities:

The marketing plan should also consider sales strategies aimed at sustaining growth. For example, a company’s immediate plans might involve penetrating only the domestic market, while in the future the company might consider a license for its products in international markets or perhaps even a joint venture.