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We intuitively
know that there is a relationship between how much something costs
and how many people will buy it, and that there is a price that the
market is willing to pay for certain goods. You couldn’t charge
$10 for a package of gum, for instance. With some products, the cheaper
the price, the more it sells, as in high volume discount supermarkets
or when things are on sale. This is called Value pricing.
On the other
hand, premium price relationships, where the opposite is
true, exist in some industries. Selling a watch for $2,000 works
for certain brands that target a high-end market segment. If there
were 10 television sets in a row for sale in an electronics store,
lined up from least expensive to most, the cheapest won’t
necessarily sell out first, and the most expensive last. The most
expensive television might have more features and be of better quality,
but some of the sets will have a higher price tag because of their
brand name alone. Pricing strategies take the characteristics of
the target market into consideration, and must be in line with the
rest of the marketing mix.
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