Strongpreneur#Business Growth Strategies
April 22, 2019 183
Strongpreneur#Business Growth Strategies
April 22, 2019 183
In order to understand branding in a better way, therefore, it is important to know what brands are first.
A brand is the idea or image of a specific product or service that consumers connect with, by identifying the name, logo, slogan, symbol or design of the company who possesses the idea or image.
Branding is when that specific idea or image is marketed so that it is recognizable by various individuals, and identified with a certain service or product when there are many other companies offering the same service or product.
A company may decide to brand or not to brand its products. However, it is unusual for companies that cover a wide geographical market not to brand their products. A brand is a name, term, sign, symbol or design or any combination of these, which a company uses to identify and differentiate its product from competing ones. It may, or may not, include a brand name, brand mark or trademark. That part of a brand which can be vocalized is called a brand name. Examples are Coca-cola, Singer, Philips, Omo, Gold Spot, Dunlop, and Star. That part of a brand which cannot be vocalized is called a brand mark. This may be a sign, symbol or mark. A trademark is a brand or a part of a brand which is officially registered and legally protected as the exclusive property of the owner.
A company may use a family brand whereby one brand is used for many product items. For example, all cars manufactured by Peugeot Automobile carry the family brand name “Peugeot”. Individual brands may be used for each item as an alternative to family branding.
Depending on the nature of a product, a company may or may not package it. A package makes it easy for a company to label its product. It also has promotional value since it can be designed to attract customers. Another function of a package is that it protects and preserves the product, from the time it is manufactured to the time it is consumed.
A label on a product serves two main purposes.
Price may be defined simply as what the buyer offers in return for the product. Usually, this is expressed in the currency of a country (dollar, pound sterling, naira terms, etc). However, our definition implies that inconvenience which a consumer suffers in his effort to acquire and use a product is part of the price which he pays. We shall, however, exclude this component in the following discussion.
Price is important to both the producer and the consumer.
(a) From the producer’s point of view, price is one of the determinants of the company’s profit, which is defined as:
Total Profit = (Price x Quantity) – Total Cost
(b) Price theory asserts that the quantity brought and sold depends on the price charged. Normally, the lower the price, the greater the quantity demanded and vice versa.
To the consumer, all other things being equal, the lower the price the more he can afford to buy, and therefore, the higher his real income (what his money can buy). For some products with snob-appeal, a high price may have status implications for a buyer.
If the price is important to both the producer and the buyer, the company must handle price decisions with extreme caution. In making its price decisions, the company normally adopts the following procedures:
These are the targets or goals which the firm seeks to achieve through its pricing policies. Examples of such objectives are cash recovery, market penetration, and market skimming.
An early cash recovery objective involves fixing a price, aimed at enabling the company to recoup its investment within a relatively short period. A market penetration objective is pursued when the company sets a low price, so as to attract as many potential customers as possible.
A firm which fixes a high price for its product, so as to appeal to those consumers who do not mind a high price, is pursuing a marketing skimming objective. The purpose is to make as much profit as possible from this group of customers.
A firm which starts with a market penetration objective may eventually raise its price, just as a firm which has a market skimming objective at the onset may eventually lower its price.
Many factors influence the firm in fixing prices for its products. The most popular ones are the cost of production, the demand for the product, the state of supply of the product or the degree of competition in the industry, and government laws and regulations regarding prices.
Generally, the higher the cost of production, the higher the price; the greater the demand in relation to supply, the higher the price; and the greater the supply, the lower the price. The government may influence prices through specific controls (e.g., price controls), or by stipulating guidelines which must be followed in fixing or raising prices. For example, in Nigeria, the prices of many essential commodities were controlled in the 1970s and in the 1980s. In addition, for some products such as cars, the price increase could not be affected unless approved by the government.
The final price of a product will usually depend on the interaction of these factors. The relative influence of the various factors will, however, depend on many variables, such as the type of product and the state of economic development.
Pricing policies are guides to management in making their pricing decisions. They are intended to guide management towards the attainment of the company’s pricing objectives. A few policy alternatives are outlined here.
Under the policy of price discrimination, the company charges different prices for the same product, even when price differences are not warranted by differences in the cost of serving the different categories of customers. A company may charge ultimate users a price different from what it charges commercial users. Alternatively, a company can adopt a one-price policy, whereby all consumers pay the same price for the same product, unless where transport and other cost differences in reaching the consumers lead to price variation.
A company may operate a discount policy under which discounts are allowed to customers on certain conditions. Cash discounts may be allowable to customers who pay in cash within a specified period of time. Customers who buy in large quantities may be given quantity discounts. Those who buy from the company frequently may also be allowed for some discount.
Pricing policies may also indicate a preference for odd pricing rather that even pricing. In odd pricing, commodities may bear prices such as $5, $11 and $199, while the even equivalents of these prices may be $6, $10 and $200 respectively.
A product may be priced higher, not because of a high cost of production, but because the high price is intended to give the product an image of prestige, high quality, and exclusiveness. Such a policy called symbolic pricing.
Some companies have a credit policy. When payment is deferred, interest is charged. A hire purchase involves paying for the product installmentally. Until all installments are paid, the seller retains the title of the goods.
This involves selecting a pricing technique which the company uses in arriving at the final price it will charge. A number of alternative methods of price-fixing are:
(a) Target Pricing: In target pricing, the company charges that price which will enable it to make a predetermined rate of return on its investment.
(b) Going-Rate Pricing: This simply means that the company, either because of its wish not to rock the boat or for some other reasons, decides to charge a price similar to what competitors are charging. A doctor just establishing a private clinic may discover that existing clinic charge $10 per month for registration. He may simply imitate them and charge the same or a similar amount. This is an example of going-rate pricing.
(c) Mark-up Pricing: The company calculates the price it will charge by adding a fixed percentage to the unit cost. If this fixed percentage is 10% of the cost and the unit cost is $10, then the price to be charged is $10 (i.e $10 + 0.1 x $10). If the company uses an odd pricing policy, it may charge $10.01 or $9.99 instead.
Firms often have cause to change their prices. Such a change may be occasioned by changes in product features, charges in the state of competition, variations in the cost of production, or a change in the level of demand. Whatever the origin, a price change is a very important management decision, which would be made with extreme care if the firm’s sales and profits are not adversely affected.
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