The price of marketing

By Ingrid Mota
Twitter: @ingridmotta

What is a price? It can be understood as several things, for example, it is the point where supply and demand coincide. It is also a sign of competitive conditions in a market. But, importantly, the price of a product is part of the essence of the marketing and it constitutes the most quantifiable part of the process: it indicates the value that the consumer is willing to pay for a product or service.

Being part of the 4 P's of marketing, the price is determined by different variables such as the product itself, the promotion that will be given and the place where it will be sold (square).

There are different factors that allow defining the price of a product or service:

  • Fixed and variable costs of the product
  • Competition
  • Positioning strategy
  • Target group and willingness to pay

    However, the consumer is the one who actually gives the perspective of the price of the products, or at least allows us, through the study of his behavior, his uses and habits, to know what he thinks or even, more importantly, the price that should be given to the product and how much profit you want to win.

    The feeling is priceless

    The marketer who manages to have the sensitivity and sufficient knowledge about what the consumer thinks about the price of a product, can trigger a successful marketing strategy.

    The perception of the value of the product vs. the money paid for a product has different levels that are included in the consumer value pyramid:



    A consumer does not necessarily buy the things that he really needs. When there is an offer that makes you climb the pyramid of your expectations and generates a pleasant shopping, service and delivery experience, it makes you change your purchasing habits, selection of product type and value, among other factors.

    A marketing strategy that focuses on the customer allows for exponential growth opportunities in the sale of a product and allows the creation of new marketing mixes, focused on the different levels of the consumer value pyramid.

    Price strategy

    We know that the price is the sum of the cost plus a profit margin (P=C+MgG) and that we would like to maximize said margin, but in the presence of competition this is not a matter of will, but of market conditions.

    There the price ceases to be an engineering factor, to become a strategic and essential tool for marketing. It is depending on the business objectives that the marketing strategy can be adjusted to different types of pricing.

    Here are some examples:

  • Price Penetration: A lower price than the competition is set in order to attract consumers and meet market share, while allowing consumers to try our product and recommend it.
  • Price economy: Keep price promotions low all the time, so that you attract a basic segment of the market that is very price sensitive.
  • Pricing Psychology: The classic “For only $99.90” is very commonly used to give a psychological idea of paying less for something, where you can mentally make a difference to the consumer.
  • skimming or price skimming: It is designed to get the most out of it by offering a very competitive price, at a time when competitors begin to offer consumers alternative products similar to ours.
  • Premium: It consists of having a higher price than the competition. It can be a very effective strategy when offering a product with unique features or being the first to market.

    Companies may have different approaches to pricing, and some may see pricing as the end result of the marketing mix where the best possible margin must be achieved.

    By having an efficient pricing strategy, you can determine that you first have to change the other variables such as: product, place and promotion, before reaching the price reduction.

    That is why we must not confuse ourselves, what is cheap for the market can be expensive for the marketer.