Nobody Buys Based on Price Alone

Consumers pay for the benefits of the product and the subjective values incorporated into the brands. All consumers are certain that the price they pay for a product is decided by the owner of the company, the manager or the supervisor of the supermarket, but the truth is that who decides the price is the final buyer of the product.

If you as a consumer acquire a cheap option, it’s because you discovered that the benefits of the expensive option have no value for you; on the other hand, if you decide to pay a high price, it’s because in the economic option you didn’t find the benefits you are looking for from the product.

The consumer would also take into account other adjoining peculiarities such as the pleasure to buy in a store where the associates treat you with appreciation, where the decoration is in tune with these disciplines, and the store location, among other reasons.

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The brand offers a product engineering that does not offer an cheap article, simply because the consumer has a reason to believe in it by different reasons, like the marketing work the company has done to transmit corporate brand values (symbolic representation of the brand). This means that consumers only pay more for the benefits they value.

All purchases are motivated by the need to achieve more benefits and values of the product, with the lowest price possible.

Focus to set the price

To determine the price of a product, the marketing manuals are based on three approaches: Cost, Customer and Competition; this is what they call the 3C’s method. The method of price setting from costs is appropriate if the objectives tend to maximize the benefit.

1. Cost method

It is natural that the starting point to determine the price is the analysis of the “internal costs” that the company assumes to make the product, such as wages, raw material, payments to suppliers, amortization of equipment, transportation, commercial expenses and advertising. To this must be added the technical cost (fixed costs and expected demand). The technical price sets the minimum threshold at which the product must be sold with zero profitability. The key to this method is to reach a target price by setting a margin above costs.

2. Customer method

If the research is articulated on the concept of customer orientation, it is logical that in the considerations for the price setting are present investigations of consumer expectations about the price of our product.

3. Competition method

The influence of the competition prices on the fixing of our own depends on the competitive situation in which we find ourselves. In markets dominated by a small number of sellers (oligopoly) there is a high reciprocal dependence.

In these cases, the management that the entrepreneurs have made with their brands has great effectiveness, but it is also important to clarify that the brand alone cannot do all the work, it requires a product or service in accordance with the expectations of the buyer.

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