El price in marketing It constitutes one of the fundamental variables to determine the objectives that we want to achieve in terms of positioning our company in the market. Discover its importance in this article.
The first thing you should know
In the first place, it is necessary to define through a simple concept of what is marketing? Basically we can define it as the entire set of activities, processes and strategies that seek to position a company or brand in the market, providing them with the conceptualization, parameters and unique characteristics that attract attention and largely cover the expectations, searches and needs of the consumer.
Currently, it is a very useful tool, since it is responsible for thoroughly studying the various strategies used in a certain type of market and product, starting from the general to the particular in order to achieve mechanisms that allow marketing in the most successful way. possible the items that are intended to be sold.
In marketing we usually talk about the 4Ps, which are: price, product, place and promotion. However, when having an idea and consequently the firm decision to carry it out, it is necessary to have all the pertinent information as well as the necessary tools to materialize that idea.
For any person or company that wants to sell a product, of course, they will seek to position it as the best in the market and because the latter tend to be dynamic and customers and their needs change, companies must always find a way to satisfy positive those needs.
What is price in marketing?
All of us have paid a monetary value for the acquisition of a product and although you do not perceive it, there are factors of both the seller and the buyer that determine the amount of the value expressed in current currency of the product.
This value is what we call price and basically it is the amount in current money that the buyer would be willing to pay for a product or service that meets their specific needs or meets the conditions required to generate profit. In turn, from the seller's point of view, it is the amount that he would be willing to receive, as long as he satisfies the effort to offer a certain product or service.
Note that the price is not necessarily the one demanded by one of the parties to the transaction, but rather it is the point of balance between satisfying the customer's needs and rewarding the seller's effort.
To learn more about this mechanism, we invite you to read the trading types where you will have a better idea of getting that balance.
Elements that determine the price in marketing
In this article, we will talk about the importance of price in marketing from the seller's point of view, since to achieve a perfect balance we must keep in mind that the price is directly proportional to the success that we will achieve with the sale of our product, without subtracting importance to the other elements. In such a way that, when setting the price, we must take into account a series of elements that come into play and assume an essential role by themselves. These elements are the following:
Cost-benefit ratio
The cost-benefit ratio consists of determining what I am actually going to spend on the production of the product, including each of the processes, that is, collection (search for and purchase of the raw material), monitoring and control, adaptation of the product to the consumer needs until reaching the final result and the benefit that you will obtain once the product is finished and brought to market.
To delve a little deeper, we invite you to read about the profit margin and learn how to set it correctly.
Business necessities
The needs of the market are those whose satisfaction depends on the companies supplying goods and services and which, to the extent they seek to fit in with the tastes of consumers. Similarly, this factor will be conditioned by multiple elements such as: seasons of the year, technology, accessibility, market segmentation, among others, for example: sale of heaters in winter.
Market Characteristics
We must highlight the importance of this factor, because the strategies must be very specific in order to penetrate the type of market that is intended to be addressed. It is necessary to evaluate each of the edges that are presented, in order to have clear ideas of how to enter a certain type of market, evaluating its possibilities, the time of existence and the type of consumer.
Consumer perception
Consumers perceive the price based on several elements that will build the idea of the "ideal price". These elements are part of the market where the product is found and basically they are: the average price compared to a variety of the same product, the minimum and maximum price of the product offered, the price of the competition and the price that maximizes your benefit.
The prices of the competition
The prices of the competition will give you an idea of the range in which you should place yours, so this has great influence in determining the amount that you intend to establish.
If the price you want to establish is well above that of your competition, you must make an exhaustive evaluation of the elements that intervene in setting it or ensure that your product offers a higher level of satisfaction for your client, because you could be overestimating it and bring you losses in the short time.
If, on the other hand, your price is well below the competitor's, you must make an evaluation based on not underestimating any determining element of it and verify that your product really meets market demands.
In any case, you should take into account whether these differences are pronounced enough to affect customer preferences, since different product penetration or stability tools are implemented in any product market, and price is the channel par excellence for achieve it.
The macroeconomic environment
There are factors that cannot be handled by the seller or by the customer. These factors are the macroeconomic environment of the locality where the market is located and the estimates in the short term.
So to set your price, you must be attentive to the economic indicators announced by the monetary authorities of your country. These can give you an idea of the behavior that prices may have in the short term through the evolution of inflation rates or the exchange rate.
Product Duration
Most products have a shelf life, which will obviously depend on the consumer. Hence, each of these elements are directly related, since by having the specific idea of the product you want to make, you will know what type of consumer it is aimed at and if it persists over time, taking into account that there are products that are positioned in the market and that already in the hands of the consumer due to their quality have a duration time.
At the time of establishing the price of our product, we must have already gone through this series of determining circumstances that of course will have allowed us to move forward to be already in the determination of the price. We must take into account that at the moment of developing an idea and having carried out the corresponding project, the same per se will have to show us the benefits of carrying it out.
Price objectives in marketing
It is important to point out that the sale price will determine the level of income of the companies; however, setting it does not necessarily obey this sole objective. Other objectives pursued by the price in marketing are those that are aimed at:
The earnings
These objectives are generally established once the product has penetrated the desired market and are aimed at maximizing the company's profits or achieving a goal of the same.
Sales
Prices can pursue sales strategies that allow the amount of product demand to grow or increase its presence in the market.
The status of the product
These objectives are mainly aimed at creating an image of certain social and economic characteristics before the product before the competition or to stabilize prices in the market.
Strategies for pricing in marketing
The pricing strategy generally follows the conditions of the product life cycle. In this sense, various strategies are usually followed as objectives are pursued with the product. The most notable are:
Market penetration through price in marketing
It consists of setting values below the average market price, but ensuring a minimum profit margin. This strategy is usually effective and should not be prolonged for a long time. Generally, it almost immediately attracts a large number of consumers that will allow the positioning of the product in the market. One of the branches that uses the strategy the most is that of cleaning products.
Skimming prices in marketing
This strategy, generally used for electronic items such as computers and cell phones of the latest generation, consists of setting the highest possible price in the market exclusively for consumers with the desire and ability to acquire it.
Once the first step has been achieved and the status quo of the product has been established, the price is gradually reduced to include other lower segments of the market.
Product Line Marketing Pricing
Generally, companies tend to resort to this strategy, aimed at increasing sales or better positioning the product in the market. and consists of offering a line of products together that result in lower prices than their individual prices. This strategy is very common in makeup or personal hygiene products.
promotional prices
It seeks to maintain the market share of the products. They are used as an incentive for consumers to maintain their loyalty to the brand and consist of the occasional setting of prices below the average to ensure presence in the market.
As you can see, the price in marketing is a powerful tool influencing the willingness of consumers to purchase your product. Evaluate the tips that we have left you and get to work!