A pricing strategy for nutritional supplements
|Type:||Problem Solution Essay|
|Topics:||💵 Finance, 💸 Accounting, 📆 Business Plan, 🍲 Food, 💳 Microeconomics, 🙋♂️ Management|
Discuss what factors will impact your pricing strategy
There are several factors that can impact or influence the pricing strategy chosen by producers and marketers of nutritional supplements. To begin with, the intensity of competition in the sale of business goods and services products determines the flexibility of pricing strategies and policies (Kerin, Hartley & Rudelius, 2011). For instance, unless the marketers of nutritional supplements have a monopolistic hold and control of the market, there is no way they can sell the products at high margins. Secondly, the perception held by customers about the value of products influences pricing (Kerin, Hartley & Rudelius, 2011). For instance, if the marketers sell nutritional supplements at very low prices, some customers may feel that the products are inferior and of low quality.
The third factor is the cost of production of the nutritional supplements. Kerin, Hartley and Rudelius argue that marketers, those of nutritional supplements included, should never price products below their total actual production price (Kerin, Hartley & Rudelius, 2011). Fourthly, the economic trends also influence the pricing of nutritional supplements. These include the inflation rate, government policies and taxation rates (Kerin, Hartley & Rudelius, 2011). Fifth, the level of the market demand for nutritional supplements also matters a lot. A low demand for a given product may force the marketers to reduce their prices in order to attract more customers (Kerin, Hartley & Rudelius, 2011).
Fifth, the class of the targeted customers also matters a lot when it comes to pricing of business goods and services (Kerin, Hartley & Rudelius, 2011). For instance, if the nutritional supplements marketers end up selling the products to the rich at a low price, the rich will tag the products valueless. Moreover, demographic attributes (age bracket, educational status and geographical locality among others) also determine the implementation of prices for various products (Kerin, Hartley & Rudelius, 2011). For example, it will be meaningless to sell nutritional supplements to illiterate and uninformed customers at exorbitant prices.
What pricing method would you use for my product/service (nutritional supplements) and why
There are several pricing methods that can be used by the producers and marketers of nutritional supplements. To start with, as Kerin, Hartley and Rudelius observe, a competition-based pricing will enable the marketers to thrive well in the midst of their competitors. This can be achieved through giving discounts, allowances and promotions among other trade benefits (Kerin, Hartley & Rudelius, 2011). A cost-based pricing will ensure that the cost of producing products does not exceed the gains obtained from their sale (Kerin, Hartley & Rudelius, 2011). If the profits made are low than the total cost of production, the marketers of nutritional supplements will be operating on losses.
A demand-based pricing will ensure that the level of production of nutritional supplements does not exceed their demand in the market. According to Kerin, Hartley and Rudelius, a high demand for a particular product might lead to a high production level and this may result in sales at high prices (Kerin, Hartley & Rudelius, 2011). Here, demand can be evaluated in terms of the willingness and the purchasing power of nutritional supplements customers. A value-based pricing is also important in the sale and general distribution of business products (Kerin, Hartley & Rudelius, 2011). Since most nutritional supplements are perceived by most customers as being quality, this is the most profitable pricing method since these customers will be much willing to purchase the nutritional products no matter their price.
Due to the fact that most nutritional supplements are new products and innovations in the market, minor pricing methods, such as, price creaming and penetration pricing can also be applied. Price creaming is a situation where producers and marketers set high prices for new products with an aim of making more sells before the onset of a tight competition (Kerin, Hartley & Rudelius, 2011). Penetration pricing involves selling new products at low prices with an aim of attracting more customers and making a large volume of sales within a short time (Kerin, Hartley & Rudelius, 2011).
- Kerin, R. A., Hartley, S. W. & Rudelius W. (2011). Marketing (10th ed.). NY, NY: McGraw-Hill Companies, Inc.