Marketing - What is Price?

Alright, so as marketers, we use product, place, promotion, and price to reach our target market

Right now, let's turn our attention to price. So what is price

Well, we all kind of know what it is, but it's helpful sometimes to have a technical definition

So here we have one, and it's that price is the total sum of everything that is given in exchange for a good or service

So, like I said, that probably fits with your concept of price, but there's some important

things we need to remember from the marketing standpoint. Rule number one, so to speak, is price equals value

And what I mean by that is, for a consumer to buy our product, they have to believe that

that price matches the value that they're going to get in the exchange

Otherwise, they're not going to buy the product. Now if we set the price too high, they're going to say it's not worth that much, right

On the other hand if we set the price too low they may buy the product but we missing out on profit opportunity So we want to set the price equal to the value in the consumer mind And that one of the tricky parts

about this in terms of trying to set the right price, is we don't necessarily know

exactly what the consumer thinks, but we can find some ways to figure that out. In

the end, the price needs to equal the value of the product. Rule number two

here is the price what's called the price quality heuristic. That's a fancy way of

saying that when we set a price that leads people to believe something about

the quality. So if our product is almost just like another product but it's more

expensive, the thinking is it should be a better or higher quality. On the other

hand if we set our price relatively low that may signal to consumers or customers

that our quality is also low. So we have to keep that in mind in terms of

deciding where to set our specific price. These two rules should guide us to make a

strategic decision about what price is right for our product