brand high quality convenience or some combination of these may be more

Brand high quality convenience or some combination of

This preview shows page 199 - 202 out of 252 pages.

brand, high quality, convenience, or some combination of these may be more important to consumers than price. 3.1.3 IMPORTANCE OF PRICE IN THE CONSUMER'S MIND In some cases, some consumers' perceptions of product quality has a direct relationship with price. Hence, the higher the price, the better the quality is perceived to be. In actual fact a lot of people hold this view, especial y when they are economical y okay. This is the reason why some shoppers make price quality judgments particularly when they lack other information about product quality. In addition, consumers' quality perceptions can also be influenced by such factors as store reputation and advertising. 3.2 THE ROLE OF PRICE IN THE MARKETING MIXPrice is the only element in the marketing mix that produces revenue. Al other elementsproduct, promotion, and distribution are concerned with delivering value to the customer, and by so doing, they represent costs. Price is also one of the most flexible elements in the marketing mix. Unlike product features and channel commitments, price can be adjusted quickly. At the same time, pricing and price competition is the number one problem facing many firms. Observations have shown that many firms do not handle pricing well enough. The most common mistakes include: (i) Pricing that is too cost oriented; (ii) Prices that are not revised often enough to reflect market changes; (iii) Pricing that does not take the rest of the marketing mix into account; and (iv) Prices that are not varied enough for different products, market segments, and purchase occasions. We shall be looking at the factors that must be considered when setting prices and at
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general pricing approaches. 3.3 FACTORS TO CONSIDER WHEN SETTING PRICES A company's pricing decisions are affected both by internal company factors and external environmental factors. This is il ustrated by figure 11.1 Figure 11.1: Factors Affecting Price Decisions Internal factors: Marketing objectives Marketing mix strategy Costs Organizational Considerations External factors Nature of the Market and demand Competition Other environmental factors (e.g. economy re-sellers, government) Pricing Decisions 33.1 INTERNAL FACTORS AFFECTING PRICING DECISIONS As already shown in Figure 11.1, the internal factors affecting pricing include the company's marketing objectives, marketing mix strategy, costs, and organization. Let us examine each of these. 3.3.1.1 MARKETING OBJECTIVES
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The first thing to be done by a company is to decide what it wants to accomplish with the particular product. For instance, if the company has selected its target market and market positioning carefully, then its marketing mix strategy, including price, wil be somehow straightforward. For example, if the Nigerian Bottling Company wants to produce a special fruit drink for the affluent customer segment, this implies charging a high price. In this instance, pricing strategy is largely determined by the prior decision on market positioning. The company may simultaneously seek additional objectives. The clearer these objectives are, the easier it is to set price. Each possible price will have a different impact
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