Most decisions made by marketing managers involve spending the company’s money, whether for advertising, paying sales personnel, setting up distributor networks, or new product development. Price is the one element of the marketing mix that directly affects the income a company receives.
In businesses with high turnover and low profit margins, a miscalculation of selling prices can have a significant impact on a firm’s annual profit. If the company charges too little for its products, it may find that although it has achieved a very respectable level of sales, the low price charged is insufficient to give it any profit.
On the other hand, too high a price may result in insufficient sales to cover fixed and overhead costs. It may also lead to unsold stocks of obsolete products. Consequently, pricing cannot be viewed as an isolated element of a firm’s marketing decision-making process. What the company can charge is closely related to the quality of its products, the advertising images it has created, and its distribution strategy.
For most firms, setting prices can be a difficult task involving both scientific analysis and trial and error. This is particularly true of new product launches, where a company has no historical precedent to base its expectations of how much customers will be prepared to pay.
Read Also: Sheep gene insights could help farmers breed healthier animals
Pricing Strategy in Agricultural Marketing
Pricing strategy refers to the means by which an organization seeks to achieve its objectives. Strategic decisions about pricing can be closely linked to broader marketing decisions. For example, a strategy that seeks a premium price position must be supported by a product development strategy that ensures a superior product and a promotional strategy that communicates the value the product offers to buyers.
Pricing strategies that range from high price/high quality to low price/low quality can be sustainable positions to adopt. However, a strategy that combines a high price with low quality may be regarded by customers as poor value, and they are likely to desert such companies if they have other options. For most companies, this type of strategy is not sustainable.
A high-quality/low-price strategy may also appear attractive to buyers, but it too may not be sustainable. While some companies publicly claim this as their strategic position, there are potential challenges:
- They may be underselling themselves and failing to recover their full costs in their bid to please customers. Unless they are operating more efficiently than competitors, they may struggle to make sufficient profits.
- If a firm is genuinely able to offer lower prices for a given level of quality due to greater efficiency, competitors may soon replicate this level of efficiency, making the firm’s prices no longer the only sustainable low prices in the sector.
Read Also: 17 Medicinal Health Benefits Of Mucuna pruriens (Monkey Tamarind)
Pricing and the Product Life Cycle in Agricultural Marketing
An effective marketing strategy must recognize how pricing functions as a product moves through different stages in its life cycle, from launch through growth to maturity.
Where product differentiation is possible, a company can take a long-term approach to its price position. However, pressure on the product’s price, and thus on its profitability, will vary throughout the life of the product.
Sales Volume Pressure and the Product Life Cycle
Pricing pressure varies according to the product’s position in the life cycle. In the early stages, such as launch and growth, there may be flexibility in pricing, but as the product matures, there is often pressure to lower prices to stay competitive.
Lifetime Pricing in Agricultural Marketing
Effective pricing is an essential component of marketing. It plays a key role in the development of ongoing buyer-seller relationships, which are central to business success.
Instead of approaching each transaction as a separate bargaining event, companies usually attempt to frame each transaction with a customer in the context of past and future interactions. Initial pricing levels with a prospective client may start relatively low and progressively increase as both buyer and seller come to recognize the value of their relationship.
In this article, the concept of pricing and pricing strategies has been discussed as an integral part of the marketing mix. Pricing decisions are closely linked to other aspects of marketing and are vital to the success of agricultural marketing strategies.
Do you have any questions, suggestions, or contributions? If so, please feel free to use the comment box below to share your thoughts. We also encourage you to kindly share this information with others who might benefit from it. Since we can’t reach everyone at once, we truly appreciate your help in spreading the word. Thank you so much for your support and for sharing!
Read Also: 4 Steps to help an Orange Tree Produce Sweet Oranges