Basics of Marketing - Kotler Philip

Pricing within the scope of the commodity nomenclature

The approach to pricing changes if the goods are part of the commodity nomenclature. In this case, the firm strives to develop a price system that would ensure the maximum profit for the nomenclature as a whole. Price calculation is not an easy task, because different goods are interconnected with each other in terms of demand and costs and face a different degree of competitive opposition. We will consider four situations.

PRICE INSTALLATION WITHIN THE FRAMEWORK OF THE COMMODITY ASSORTMENT . The firm usually creates not a separate product, but a whole product range. For example, Panasonic offers five different color synchronous video cameras - from the simplest weight of about 2.1 kg to a complex weight of about 2.9 kg with automatic focus, a system for controlling the influx and two zoom lenses of different aperture. Each subsequent assortment chamber has some additional properties. The management must decide on the stepwise differentiation of prices for different cameras. When setting the price step of each level, it is necessary to take into account the differences in the prime cost of the cameras, the difference in the estimates of their properties by buyers, as well as the prices of competitors. With a slight gap in prices between the two neighboring cameras of the assortment, consumers will buy more perfect, and if significant - less perfect.

In many spheres of trade, when setting prices for goods of their assortment, sellers have clearly established price benchmarks. So, in men's clothing stores I can sell suits of three price levels - 150, 220 and 310 dollars. These three price points will be associated in the minds of buyers with products of low, medium and high quality. Even in the case of a moderate increase in all three prices, people will, as a rule, continue to buy suits of their preferred price level. The task of the seller is to identify the qualitative differences of goods perceived by the consumer, justifying the price difference.

SETTING PRICES FOR ADDITIONAL GOODS . Many firms along with the main product offer a number of complementary or auxiliary products. The buyer of the car can order electric windows, devices for preventing fogging of windows and adjusting the intensity of headlamps. However, setting prices for these complementary goods is a complex problem. Automotive companies have to decide what to include in the original price of the car as standard equipment, and what to offer as complementary products. The strategy of pricing of the corporation "General Motors" usually consists in advertising the "stripped" model at a price of, say, $ 6 thousand to attract the public to the salons, which show basically equipped with additional equipment machines at a price of 8 - 9 thousand dollars. Cheap " Naked "model is deprived of so many amenities and advantages that most buyers reject it. When the series of its new front-wheel drive cars was introduced to the market in the spring of 1981, the corporation took advantage of the experience of Japanese automakers by including in the list price the cost of a number of useful devices that had previously been sold only as complementary products for a special fee. Now for the advertised price offered a well-equipped car. But unfortunately, this price exceeded 8 thousand dollars, and many buyers refused to buy cars.

INSTALLING PRICES FOR OBLIGATORY ACCESSORIES . In a number of industries, so-called mandatory accessories are produced, which are to be used together with the main product. Examples of such mandatory accessories are razor blades and film. Manufacturers of basic goods (shaving and camera machines) often assign low prices to them, and high margins are placed on mandatory supplies. So, the firm "Kodak" offers its cameras at low prices, because it earns good money selling films. Other producers who do not offer their own film have to set higher prices for their cameras to obtain the same gross income.

ESTABLISHMENT OF PRICES FOR BY-PRODUCTS PRODUCTION . The processing of meat, the production of petroleum products and other chemicals are often associated with the emergence of various kinds of by-products. If these by-products are not of value importance, and getting rid of them is not cheap, all this will affect the price level of the main product. The manufacturer seeks to find a market for these by-products and is often willing to accept any price if it covers the costs of their storage and delivery. This will allow him to reduce the price of the main product, making it more competitive.