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Literature & Language
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English (U.S.)
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Topic:

The Marketing Mix (Essay Sample)

Instructions:

The Marketing mix. The sample looks at price as an aspect of the marketing mix.

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Content:

The Marketing Mix-Price
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The Marketing Mix-Price
Creating product prices is a difficult choice for a company. Available alternatives include offering the product free of charge, pricing based on input costs plus a profit margin, or premium pricing based on consumer’s propensity to spend. The model a company chooses will depend on its brand image, available capital, or its growth prospects (Narayandas, 2005). Therefore, the chosen model should reflect how a company implements its business strategy to attain financial objectives. The model will take into consideration characteristics of the market and consumers, models of competitors, and goals of the company with respect to the volume it wants to drive in the long-term.
Pricing Models
Canned Vegetables
The most appropriate pricing model for canned vegetables is a cost-based model. This model uses the unit cost of production, which includes direct and indirect costs when setting price. The company will add a profit margin that is a percentage of the total cost of production to the final price (Narayandas, 2005). Characteristics of cost-based pricing include:
It is easy to adjust price when costs increase.
It is ideal for those products that have a specified quantity of raw materials.
It suits manufacturer who can scale production relative to the product’s demand.
It does not consider competitor pricing models, as long as it covers unit costs.
It ignores the effect of pricing on the product demand.
It does not give an incentive to improve efficiency.
Companies that produce canned vegetables incorporate various ingredients to make the food nutritious. When pricing, first they will add the cost of inputs then include a profit margin to come up with the final price. This means that many companies within the same industry may have different prices for the same product if the cost of inputs is different (Agriculture, Food and Rural Development, 1999).
Aspirin
Aspirin is a drug people consume when they are sick and the most appropriate model is value based pricing. Its manufacturers use different ingredients in varying combinations during production. Therefore, they will set a price depending on the value consumers attach to the product (Anand, & Khanna, 2000). The company does not rely on prices of competitors since people will consume this drug based on its effectiveness to cure maladies. The demand for the product is pegged on the number of sick people meaning that if the company were to add more ingredients to the drug to make it more useful and charge more, people would still buy it. G...
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