Pricing strategies for canned vegetables and pharmaceutical products

Pricing Method

In any market, there is bound to be a strategy that is used to decide on the prices that the commodities or the services that the potential clients will be in need of. Since the goods or the services availed are always targeted at making a profit at the end o the day, pricing is one of the most fundamental focuses that the entrepreneurs have to keenly look at in order to strike a balance between making profit and retaining clients for the item offered.

In the case scenario below, the pricing methods that should b used in determining the prices of canned vegetables and Aspirin are looked at, the various methods that can be used and how different the pricing methods are as well discussed.

Pricing method for canned vegetables

Taking into account that almost each food outlet has canned vegetables, with several alternatives floated by each outlet, it is important that while the sellers find an appropriate way of pricing their canned vegetables. In a situation like this, where the competition is high and the similarity in products apparent, it does not help to only consider the competition and use the competitor pricing method only.

The best pricing method to employ here is the customer-based pricing approach. This is the approach that takes into account the psychological predisposition of the customer base while setting the prices. It looks at the direction of thought of the customer before settling for a price, this hence enables the customer to always think of their store any time they want to buy canned vegetables.

Customer-based pricing is basically psychological pricing and the following sub-sets therein must be taken into account (Scott Allen, 2012);

Positioning-this deals where the seller wants to be placed in reference to the competition. If the seller wants to be 'low-cost leader' then he must price the canned vegetables lower than the competition, yet if they want to signal high quality, then they must be slightly higher than the competition. The latter does not work well within the canned vegetables bracket, but rather the first approach works better. Canned vegetable prices will always attract or repel buyers since the qualities are all approved by the standardization agencies and the tastes are the same. The lower priced canned vegetable will always get a higher stock turnover.

Popular price points - this is yet another psychological approach to customer pricing method since there are some price points at which clients are generally more susceptible to buying an item than other price points, not because there are great differences in prices but due to a very slight saving ability. The canned vegetables should be priced at such prices like just under $100 or just under $5. For instance, people will be easily drawn to buy cans priced at $0.99, or $9 or even $99 rather than $1 or $100. Being a consumable that is bought regularly, almost on a daily basis or in bulk and stored in the house, this psychological pricing of having the items at popular points can work well for canned vegetable. It can be argued that the dropping of the prices to popular price points could lower the margin, but it is worth noting that the increase in sales it will result into will offset the lowering of the profit margin.

Fair pricing is yet another consumer focused pricing method that can be used in canned vegetable pricing. At times it is worth taking into account the fairness to the customer while setting a price even if you do not have direct competition or regardless of the value of the product. This can be applied in a situation where the stickiest of the canned vegetables has a monopoly of the market, it is essential that they use a pricing that the consumers perceive as fair and not ripping off the customers due to the undue advantages that you have.

Comparison between the two pricing methods

In as much as the two pricing methods have different approaches, there are some fundamental baseline considerations taken while setting the pricing. In both cases there is the consideration of the production cost before the price is set, the profit margin is also considered in both instances since each business is driven by profits among other considerations. Before the setting of price in both cases, there are costs like the logistics and distribution costs that are considered. The prices of the competitors are also considered while setting the prices.