PART 4 – Pricing
4.1. Marketing and Pricing
Determining a price for your product is an important step when coming up with a marketing plan. If the price is set too low your company will have a hard time making a profit. A price that is set to high could encourage competition, which could hinder the success of your company.
4.1.1. Pricing the Product
To get an idea of how you should price your product there needs to be frequent checks made of your competition and how they are pricing their product. By doing this you will be able to create a history of pricing so you can determine if there are any trends. Having a good history of your competitors pricing will let you know if they change the price at certain times of the year in an effort to boost their sales. This will let you counter their pricing with your own prices keeping you competitive at all times. By looking at your competition, it will help you see supply and demand trends that will help you set a competitive price that will ensure your company the best chance to turn a profit.
4.1.2. Is Your Product Elastic?
Having a good history of pricing will let you know if your product is price elastic. Your product is considered price elastic if the price of the product is raised and the demand for the product decreases. The same is true if the price of the product is lowered and demand for the product goes up. A good source for this information is the surveys that you have completed or from focus groups that you have had done to gauge consumer opinion. Your research should let you know how elastic your product is, and the elasticity of your industry.
4.2. Know Your Competition
Doing a complete analysis of your completion is a crucial step in determining how to proceed in your marketing campaign. By analyzing your competition, you will have to look at the differences between your company and others. The analysis should also include how your competition markets their product and will give your insight on how you should respond with your marketing campaign. By analyzing your competitions marketing campaigns and strategies you will be able to see where they succeeded and where they failed giving your company an advantage when you implement your marketing campaign.
4.2.1. Key Information
When you are doing a comparative review of your company against your competitors there are certain elements of information that you want to look at. From the information that you have already gathered you will want to compare target markets, sales, pricing, packaging, customer service, marketing objectives, and publicity. The secondary research that you have already done will be the best sources of information when it comes to checking out your competition.
After you have done a complete analysis on your company and your competition you will be able to know the market share of your competitors in relation to your company. How your competitors distribute their product. Their marketing strategies, and where they were successful and where they were not. You will be able to determine if they have a loyal customer base or whether consumers of their products have looked elsewhere.
4.2.2 Marketing Analysis
Your comparative analysis should include an in depth look at your company and competitors marketing campaigns. After you have completed the review of your company and your competitors you will be able to get a clear understanding of your products strengths and weaknesses in comparison to the competition. You will also be able to see any trends in market share and sales. What percentage of the target demographic account for sales and is this the same target demographic as your competition. You will get a better understanding of your company’s marketing strategies and how they are like or different from your competitors.
In addition, you will be able to compare your products pricing to that of your competitors. You will also be able to know how your customer service stacks up against your rivals. You will see if your company relies on marketing more or less than the competition and you will see if your marketing campaigns were successful to driving business away from your competitors to your company.
4.3. Moving Forward
Now that you have completed the business review its time to prepare the marketing plan. The first step in this process is to set sales objectives. This is not as easy as it sounds, no random number will do, and it will take time and effort to project a proper sales objective.
4.3.1. Sales Objectives
The entire marketing plan will be designed on meeting the sales objectives, which is why this step is first and crucial to get right. Because sales are so important to a company the objectives must be simultaneously demanding and achievable. The sales objectives must be set by giving a precise estimate of the opportunities that exist in the marketplace along with the ability of the company to meet those estimates. By setting sales objectives too high you will also be putting more pressure on the entire organization and increasing the cost of running the company. If sales objectives are too low, the company will have a hard time keeping products in stock and meeting consumer demand. Sales objectives that are not accurate will put a strain on your company that is avoidable.
As well as being demanding and achievable sales objectives must be time specific. This will give your marketing team a start date and an end date. Short-term sales objectives are usually designed for up to twelve months and long-term goals are designed for up to three years. Remember what is included in the short-term marketing plan will affect sales for the years after the first. Therefore, if your company is designing new products to be released they should be tested in the first year so by the third year they will be able to reach sales objectives.
The sales objectives that have been set must be able to be measured. How you plan on measuring the sales objectives should be included in the marketing plan. There are several ways that you can make the objectives measurable. It can be done in terms of money, units, and transactions. Measuring with money indicates the expenses that you have incurred making the product; the profits made, and will also show any elasticity of the product if there were any price fluctuations. When you measure with units and transactions, it will show how well your product is being received by consumers. Sales objectives must also include a projection of profits because sales have a direct influence on profits.
4.3.2. Influence on Sales Objectives
Your research will come in handy when setting sales objectives. A review of the marketplace over the past five years will show any upward, downward, variable or static trends. Analyze how your sales at your company are moving on a yearly basis in comparison to sales in the entire marketplace. This will give you an idea how to project sales in the future. Sales should be projected at least equal and perhaps a little ahead of market growth in order for your company to maintain its share.
You will also need to review your data for any trends that yu can see in your company’s share of the market. If you find that your company’s share of the market has been changing, whether it has been increasing or decreasing, you will be able to adjust your sales projections accordingly. If you find that the market is in decline or your market share in in decline be aware that this is something that is extremely difficult to turn around.
Additionally, to be able to set proper sales objectives it is good to review your company’s history in terms of annual budgets and expected profits. This will at least give a minimum number to start with because sales of your product will need to cover operating expenses. If price change during the year, at holidays for example, these need to be factored into your sales objectives.
One factor that is difficult for any business to predict when it comes to sales objectives is economy. The best you can do is analyze the data that you have and set the sales objectives to an estimation of what you feel the economy is going to do. Along with trying to predict the economy, you must keep a close watch on interest rates. Interest rates are important in companies because the customers use credit many times to purchase goods. If interest rates go up consumers are going to tighten their purse’s string and not to buy goods.
Moreover, another factor that can influence sales objectives is your competition. If you are part of a growing market it might attract more competition so be sure who you are up against before finalizing your sales objectives. In addition, instead of more business competing against you it could be an old competitor that is looking to increase their market share and trying to push you out, so you will have to respond to their challenge.
The last factor you may want to address when setting your sales objectives is the product itself. Every product on the market has a life of its own and it is up to you to determine where your product has been on the market for several years and you will want to take that into consideration because your market might be smaller because people may already have the product. Conversely, you might be introducing a new PR improved product that has a vast untapped market.
PART 4 – Pricing