Questions and Answers
What is the main intention of a business when offering products and services?
To make a profit
Why is pricing considered tricky and challenging for marketers?
Because customers have different expectations of value and benefit
What should be considered before determining the price of a product or service?
The total cost of production
What is the consequence of setting a price that is less than the total cost of production?
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What is the relationship between the price set by a marketer and the customer's expectation of value and benefit?
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What does the customer perceive as a fair price?
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What is a crucial factor to include when setting a product's price?
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Why is pricing considered challenging for marketers?
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What is the consequence if a product's price is set lower than its total production cost?
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What should a marketer prioritize when considering a price for their product?
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Study Notes
Importance of Price in Marketing
- Setting the right price for a product or service has far-reaching consequences.
- The price a marketer charges is a vital decision that affects business profitability.
Purpose of Setting a Price
- Businesses set prices to make a profit from their products or services.
- From the customer's perspective, they have a specific price in mind that they consider "fair and profitable".
- This price is related to the value or benefit the customer expects to derive from the product or service.
Challenges of Pricing
- Pricing is challenging for marketers due to the varying expectations of customers and businesses.
- The marketer must balance the business's need for profit with the customer's perception of "fair" value.
Factors to Consider when Setting a Price
- Total cost of production must be considered when determining the price of a product or service.
- It makes no business sense to set a price that is less than the cost of production, as this would result in a loss.
- A profitable price is one that is higher than the total cost of production.
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