PRI - Pricing [LESSON]

Pricing

When Chick-fil-A opens new locations, they offer the first one hundred customers a free meal every week for a year. Customers camp out to get the free meals. Many people will stand in line for something free, even if it takes hours. So how do sellers make any money if they always offer goods and services on sale or for a special deal? Many sellers give customers something for free hoping they'll buy other products, but a careful balance is needed to make sure a profit is made. Are free products a good pricing strategy?

In marketing we will look at the offering (products and services), communication (promotion), and place (the other marketing mix variables), all of which cost firms money. Price, or the value of money placed on a good or service, is the only marketing mix variable or part of the offering that generates revenue. Buyers relate the price to value. They must feel they are getting value for the price paid. A business's prices also establish a company's image. Pricing decisions are extremely important. So how do organizations decide how to price their goods and services?

When KFC introduced its grilled chicken, they put coupons good for a free piece of chicken in many Sunday newspapers.

Before pricing a product, an organization must determine its pricing objective(s). A company can choose from pricing objectives such as maximizing profits, maximizing sales, capturing market share, achieving a target return on investment (ROI) from a product, and maintaining the status quo in terms of the price of a product relative to competing products.

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