Determining the prices of commodities are one of the most challenging tasks. How can a shopkeeper or owner how much ahead of lettuce or a pound of tomatoes is worth? Generally, prices are determined by marketing and production cost at the lower end, whereas the upper limit is determined by the desired profit of the seller, competition available and what consumers are willing to pay. It is crucial for manufacturers, wholesalers, and retailers to determine their costs and set the prices of their commodities accordingly, rather than imitating the prices of others; stable; reliable prices are encouraging steady, consistent clients. This paper highlights why prices should reflect the value consumers are willing to pay. Conceivably more than any other element of the mix conveys value to the customers. According to Nagle & Müller (2017), customers are value-maximizers in the consumer decision-making process. Consumers formulate an expectation of value and implement it. The satisfaction of a consumer is a function of the perceived performance of the product and the expectation of a buyer. Therefore, if the products sold to they fulfill the consumer's value, the price is viewed as acceptable. Hsu & Lin, (2015) highlights that if the product value definition and price in the mind of the client are not consistent, sales will reduce and prices will decrease until prices attain equilibrium with the definition value of the consumers. Consequently, it is important that prices should reflect the value consumers are willing to pay According to Nagle & Müller (2017), marketers have the responsibilities to the clients to produce services or products which fulfills the needs of the clients at the lowest possible prices. Also, Hsu & Lin, (2015), observes that fair pricing assigns any customer “value” definition into its equation and it should not since each client or consumer will have a different perception on definitions of “value” conferring to their prejudice. Nagle & Müller (2017) depicts that marketers risk missing on other potential clients or risk losing their current customers if they contemplate to “assign” a “value definition” to its goods and services. Therefore, conveying a “fair” price which is composed of fair margins and actual costs permits marketers to maximize on their client base since it reflects the value consumers are willing to pay.
References
Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably . Routledge.
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Hsu, C. L., & Lin, J. C. C. (2015). What drives purchase intention for paid mobile apps?–An expectation confirmation model with perceived value. Electronic Commerce Research and Applications, 14(1), 46-57.
