7.Marketing Mix - Price

A situation I commonly encounter is where a company bases its selling price on the cost of the product plus an internally agreed percentage or margin. This calculation is done irrespective of product or market sector or customer perceived value.

This means that some products are priced too expensively and hence never generate the volume they should, and some products are priced too cheaply and never generate the volume or profit they should.

Also be aware of the salesman's anecdotal evidence that price seems to be the only factor that a customer considers in making a purchasing choice. A huge amount of research has been done on this subject. Whereas the salesman will generally place price as the number 1 factor in a list of factors such as delivery, service backup, functionality, etc; customers will place it as only the number 3 or number 4 factor.

The production of good sales presentation material can help enormously here in that the salesman can be guided to promote other positive aspects of the product or service on offer and hence build up its perceived value to customer. If there is no attempt by the company to influence the sales story then invariably it will be driven by the customer and this can lead very quickly to a debate on price and nothing else.

To take this argument a little further it is quite possible to sell exactly the same product to two different customers and charge radically different prices. This is simply because the customers operate in different market sectors and value the product quite differently.

I am always surprised by the number of companies who do not seem to have thought through all eventualities and decided how to charge for the various scenarios. A well thought through strategy can give you the ability to sell the same products at vastly different prices to different market sectors without upsetting any of your customer base.

Is your product a loss leader? By offering a product at a greatly reduced price you can generate a lot of interest from customers in a relatively short period of time and give yourself the opportunity to generate more business from those customers in the fullness of time. It can even be worth your while to make a loss on this product.