ABSTRACT
After deciding which segment(s) to target, the producer must decide what price to charge their customers. Determining the right price is by no means a perfect science. First of all, different philosophies exist as to what constitutes a fair price. While there is complete agreement that the price offered must cover the cost of the product and return a profit to the producer to compensate for the risk incurred, the difficulties arise when discussing how high the realized profit should be. Athletic shoes cost pennies to make, a few dollars to advertise, and yet retail for hundreds of dollars. Selling shoes it seems is more profitable than distributing narcotics (certainly is safer). With a such a high rate of return surely, some argue, shoe manufacturers are abusing their market power and charging too high a price. That perspective ignores that consumers will pay a premium for branded and high-quality goods. As we demonstrated in the last chapter, customers like products that offer many benefits. Producers that spend resources developing their product into a brand will realize a higher profit margin, assuming the product delivers on the promises it makes to consumers. One of the great challenges for marketers in this decade is to keep prices up in spite of cheap imports from China, India and other countries. Industry after industry and country
after country have seen much of their livelihood greatly affected by lower cost producers in far lands. The fashion industry is one prominent example, among many. Even the great fashion powerhouse of Italy, long famous for the best cloth in the world for men’s suits, is seeing factory after factory closed as the quality of Chinese manufacturing continues to improve, much to China’s credit. What should Italian fashion marketers do? This is a difficult question but staying on the leading edge of design, cloth and manufacturing technology and thinking seems to be critical. Brands are undoubtedly part of the solution. This is a story for marketers around the world to watch.
