This is the amount the consumers are willing to pay for the product or service to satisfy their needs.
A product is only worth what customers are prepared to pay for it. The price needs to be competitive, but this doesn’t mean you have to be the cheapest in your market – small businesses can compete with larger rivals by offering a more personal service, value-adds or better value for money.
You also need to make a profit. Pricing is the only element of the marketing mix that generates revenue — everything else represents a cost to you.
When considering the price of your product, it’s important to look at it from the customer’s perspective:
– Price positions you in the marketplace
— it tells customers where to place you in relation to your competitors.
– The more you charge, the more value or quality your customers will expect for their money.
– This is a relative measure. If you are the most expensive provider in your market, customers will expect you to provide a better service.
– Everything that the customer sees must be consistent with these higher quality expectations — packaging, environment, promotional materials, website, letterheads, invoices, etc.
– Existing customers are generally less sensitive about price than new customers
— a good reason to look after them well.