Pricing and Discounting

Price is one of the elements that consumers consider when making a choice. It is part of a brand’s position, signalling quality or functionality as well as the cost of producing a product or service. Price can also be varied independently of the rest of the brand’s attributes; for example, offering a special reduced price, where it can be assumed that the rest of the brand’s attributes are unchanged. Price is not often the all-important factor for consumers. The cheapest brand is very rarely the biggest in any market. Most consumers spend little time considering price and have poor recall of the price they have paid for an item. Nevertheless, when price is varied, volume tends to change in line with basic economic theory—price up means volume down—but by different amounts in different circumstances. This chapter considers what marketers need to know about pricing to make better price- related decisions: how to set a price, and what will happen when competitive environment.