Page 3: Price
In pricing its products, a business must consider four things:
1. Business objectives. The business may set its pricing to achieve a number of different objectives. These may be to:
- maximise profits
- achieve a target return on investment
- achieve a target sales figure
- achieve a target market share
- match the competition.
2. Costs. In order to make a profit a business must make sure that its products are priced above their cost. The total cost of a product includes overheads such as research and development, investment in equipment, people and technology, as well as direct costs, such as raw materials and ingredients.
3. Competitors. If there is no competition the business can set whatever price it chooses. On the other hand, if there is perfect competition then the business must accept the market price for its products. In most cases the reality is somewhere in the middle.
4. Customers. The business needs to consider what its customers' expectations will be. For example, customers may be prepared to pay more for a product that is unique or produced in an ethical and sustainable manner. This would place it as a premium brand above its competitors.
McCain uses a range of pricing strategies associated with adding value for money. For example, 'extra-fill' packs can give the customer up to 30% extra free. This rewards regular buyers of a particular product. McCain may also offer its products at a special promotional price using price-marked packs to encourage people to try the product.