How an Effective Marketing Mix can Increase Profits
(Part 2, Pricing)
In my last blog post, we covered the 4 Ps of marketing also known as the marketing mix, and how these four basic concepts can be used as a foundation for your marketing program. Also, that blog post was an explanation of the first P which is the Product. In this post, we will cover the importance of Pricing your goods and services.
Price is what your customer is willing to pay for the product. Many businesses work on a cost-plus mark-up to determine their selling price. This is very common in retailing, adjusting the price to meet competition or discounting, and increasing sales volume while creating an image of lower prices.
Companies that offer services with a product have more latitude in adjusting their pricing by offering superior performance. An example of this happened to me recently when I contacted painters for my home renovation. The individual that I hired had the highest price quote, but he sold me on the quality of the paint and went into detail explaining what he was going to do. He described the preparation of the surface, the types of paint used, and the results I could expect.
There is a psychology in pricing which is used to create an impression of a lower price by ending with 99 cents. A price of $5.99 appears cheaper than a selling price of $6.00. Upscale restaurants use a whole number such as $29 with no zeros to convey the image of an affordable price.
In my former career in manufacturing, we were able to increase profit margins by streamlining our product line. This increased the turnover of parts and raw materials leading to a higher turnover of inventory. Another contributing ingredient was that we increased our purchase quantities of the faster moving materials which increased our discounts from suppliers. The selling prices were never lowered and the net result was a very high gross margin of profit.
If you have any questions, please contact me at nick@kbizbrokers.com
If you want to use the photo it would also be good to check with the artist beforehand in case it is subject to copyright. Best wishes. Aaren Reggis Sela