Page 112 - Marketing the Basics 2nd
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price
After deciding which segment(s) to target, the producer must decide what price to charge its customers. Determining the right price is by no means a perfect science. First of all, different philosophies exist as to what constitutes a fair price. While there is complete agreement that the price offered must cover the cost of the product and return a profit to the producer to compensate for the risk incurred, the difficulties arise when discussing how high the realized profit should be. Athletic shoes cost pennies to make, a few dollars to advertise, and yet retail for hundreds of dollars. With a such a high rate of return surely, some argue, shoe manufacturers are abusing their market power and charging too high a price. That perspective ignores that consumers will pay a premium for branded and high-quality goods. And because of technology, it is possible to charge a different price depending on the brand loyalty of the customer.
As we demonstrated in the last chapter, customers like products that offer many benefits. Producers that spend resources developing their product into a brand will realize a higher profit margin, assuming the product delivers on the promises it makes to consumers.
In this chapter we take a closer look at pricing products. We’ll investigate the role of customer loyalty in setting the price, and






























































































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