Very good article…read on!!! It’s quite regrettable that many people who want to run successful businesses don’t understand the fundamental principles of marketing and consumer behavior.
Price is one central determinant that every serious entrepreneur should understand. If you want to shoot an ant, do you look for a gun? If you want to shoot an elephant, do you use a knife? You need to understand the most appropriate tool and its probable efficacy in reaching out to any particular target. I am very worried that I frequently meet a lot of small business people who do a lot of guesswork in trying to know how to serve their markets with the correct price.
In most cases, they over-price their offerings thereby resultantly getting negative feedback from potential buyers. The bottom line is, if you don’t know how to price your products and services, people will simply not buy. Understanding buyer behavior is a critical driver for a business’s survival and long-term sustainability.
You see someone talking of outrageous prices to SMEs, this is failing to understand your target. A target market should be thoroughly understood. SMEs by nature are still growing and are not prepared to part with all those big monies some of us want to charge!! If you bring wrong prices to certain markets, you will inevitably face resistance and that will make it hard for you to have business success.
Price is a very sensitive variable of the marketing mix and if not well-understood will bring doom to a business. If you also sell below cost, you are headed for disaster! If you come with a Mercedes Benz and selling it for RTGS $50, how many people do you think would be willing to buy it? If someone brings loaves of bread and is selling them at US$20, how many people do you think will buy?
Monopolies are the ones known for charging what they want but in perfectly competitive market structures, the price has to be well thought out. You see, the price has to reflect an understanding of the target! You need to know how to configure a marketing mix and value proposition that is backed by an understanding of who you are trying to serve.
A marketing mix is a set of controllable variables that marketers blend with a view of serving and delivering value to certain target audiences. It has 7 key variables, namely: product, place, price, promotion, people, processes and physical evidence. This framework is also a conceptual and analytical framework for marketing strategy as well.
One of the very starting points of any marketing strategy is defining the target market.