PRICING CONSUMER PRODUCTS

PRICING CONSUMER PRODUCTS

PRICING CONSUMER PRODUCTS

Every trading organization depends for its revenue upon the prices which it charges for its products or services. A company's purchasing, manufacturing, sales and distribution costs and its ultimate profits are met from this revenue.

As we have seen, there are two entirely different methods which a firm may adopt in arriving at its pricing strategy. One is the cost-plus approach. This is the traditional method, fairly easy to operate, one which is oriented towards meeting the needs of production. One calculates, in advance, what it is anticipated the product will cost to make and distribute and adds the margin of profit which is required to achieve ones declared aims.

The alternative method, known as the market approach, concerns itself, first of all, with the price which the customer is likely to be prepared to pay. From this, the costs of production and distribution are deducted. Providing the resultant figure, which represents the profit to be earned, is considered satisfactory, the product can be launched upon the market. If the profit figure is too low one has two alternatives: production and distribution costs must be reduced or, if this is not feasible, the project must be abandoned.

In the United Kingdom, the principle of Retail Price Maintenance, by which product manufacturers fixed the retail selling prices of their goods, may no longer be legally enforced. Nevertheless, many firms still recommend the price at which the retailer should sell their brands to the public. This can pose considerable problems for the ONLINE MARKETING Manager concerned with consumer products. Not only must he decide upon the price at which his brand will be sold to the wholesaler or retailer, he must also establish a realistic price at which it will be sold to the consumer. H

In fixing his selling price, the ONLINE MARKETING Manager must bear in mind the need to achieve the profitability objectives which have been set for the product. He must also ensure that the price upon which he decides is not higher than that which the consumer is prepared to pay for the merchandise. Furthermore, having once settled upon a price, he will not wish to have to alter it too soon, in spite of possible fluctuations in costs or in the market situation.


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