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5 Ps – Price

Price 

The amount of money needed to buy products.

  • What is the consumer acceptance price range for this type of product/service?
  • How does the proposed product’s/service’s price compare?
  • Is there sufficient margin between the manufacturer’s cost and the consumer acceptance price level to provide for markups at the wholesale, distributor and retail level?
  • Does the price allow for freight, projected profit, price fluctuations in the market place and consumer interpretation of value?
  • Are coupons or discounts being considered to promote consumers to try other flavors, etc.? Product introduction.
  • What is the product cost breakdown?
    • Costs of goods sold:
      • direct labor
      • direct materials
    • Operating expenses
    • Selling expenses
    • Communications expense
    • General and administration expenses (including freight)
  • What markups are allowed at each level of distribution (markup chain and channel pricing)?
  • Are the most economical/cost efficient methods of processing and packaging utilized (including raw materials inputs) to keep product/service costs down?
  • Other Price Considerations:
    • List Price
    • Discounts
    • Bundling
    • Payment Terms and Financing Options
    • Leasing Options

General Tips

  • Review product/service costs for accuracy, including all variable and fixed expenses.
  • Be sure all products/services carry their share of overhead expenses plus provide for profit.
  • Compare prices for your products/services with similar products/services in the industry.
    • If your prices are higher, do they provide the necessary “added value” to justify the higher price?
    • If your prices are lower, do you know why they are, and is the lower price part of your marketing strategy?
  • How price sensitive is your market — in other words, how much change occurs in buying behavior when prices rise or fall?
  • Do your prices position you as “top of the line” or “bargain basement?” Are you happy with your position?
  • Does your current marketing strategy support this price position?

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