Page 3: Price
The price charged for a product will depend on a number of factors: the cost to make it, the level of profit required, competitor prices and the price consumers are willing to pay. The demand for necessities, such as bread and fuel, is unlikely to change much as prices fluctuate.
The demand for sportswear and casual clothing, however, is more likely to be price sensitive. Getting the price right is a key part of an organisation’s marketing strategy. This is because it is the price that directly generates income, allows debts to be paid, re-investment to occur in the business infrastructure and profits to be made.
Businesses need to ensure that the price charged is perceived by consumers as value for money in relation to the quality of goods and services.
There are different pricing strategies which can be adopted to generate demand:
- Market penetration – introducing a new product at a lower price to help gain market share.
- Competitive pricing – often used for well-known products or brands that are in high demand. Prices are similar to competitors. To be competitive, JD must ensure it doesn’t charge higher prices for the same goods (or similar) than other sports and fashion retailers.
- Strategic pricing – This might be used to position an exclusive product or brand to make it more desirable for consumers and generate demand or demonstrate value.
By buying in large volumes, the company’s unit costs are lower. For example, discounts achieved by bulk purchases of trainers means the cost for each pair is lower than that paid by smaller retailers. This ensures JD remains competitive.