Price, The Second P in The Marketing Mix
Price, The Second P in The Marketing Mix
I discussed in a former article my view on the Marketing Mix known also as the 4Ps. In this article I will focus on the second P, also known also as the Price. By introducing the 4Cs, the Price became known as the Cost.
When you are about to commence your product, you need to conclude its price, or even its cost, either to you or the social you are targeting. As I stated in earlier articles, your goods may be just an idea that you want to share with others. However, If your aim is to make money out of your goods you look into the cost, either its is your cost or the potential purchaser’s cost.
In many cultures we hear the words “Time is money”. In other cultures time is free, while most are legitimately using a combination of both. Lots of people don’t value the time unless they start running out of it. If I am paid 40 Usd/hour doing my daily work, I won’t replace it by writing blogs that will give me pennies on the dollar spent. It all summarizes in your own think to share a product. If your aim is just to share ideas for the fun of it, then you would not probably care about the estimate of time, neither the financial figures spent to promote your product. Some people opt to blog for fun, in their free time, and legitimately don’t mind making an supplementary dollar.
I do not understand though the promises of financial freedom when it comes to “work from home” or some affiliate programs. In order to guarantee this financial freedom, you legitimately should work on your blogging full time, making sure you have adequate traffic running straight through your site in order to interest a few to click on this ad or the other, hence losing the freedom, and becoming a full time employee, be it on your own turf.
The time you spend mental of a goods and putting it out to the social for grabs, costs you money. You could have worked in a job that gives you 2 Dollars a day. As low as that is in most standards, these are 2 Dollars that you cannot afford to lose. You can invest in your thoughts, and expect a return sometime in the future, but you legitimately have to take that into catalogue when you are calculating your costs.
On other hand, you have to think about your potential clients. How much are they ready to invest in order to buy your product. Some websites offer free services and rely on advertisement; others have paid subscription, or pay per performance (view, download, click, etc…)
When we are in a business, we are in it to make money. In my field of touch we used to rely on average revenue Per User (Arpu). The recipe was rather easy: Total estimate collected within a month divided by the total estimate of subscribers we had during that same month. As an example, if we had 1,000 subscribers making total calls in month for a value of 100 $ each, and 5,000 subscribers making total calls of 5 $ each in the same month, the Arpu will be:
[(1,000x100) + (5,000x5)] / (1,000 + 5,000) = 125,000/6,000 = 20.83 $
This was the easiest recipe at that time. After some years of using this recipe and going straight through a series of modifications and details in it due to goods life cycle changes and introduction of multiple services, we had also to introduce the average Cost Per User (Acpu). Although Acpu is not as “standardized” as the Arpu in telecom, more and more companies are adapting it. The earlier version of the Acpu was Cpu (Cost Per User) which involved the license fees, among other costs per user (I will discuss those subjects among others linked to Telecom in hereafter articles). As you can see we were focusing more on the revenue and less on the cost. The more competing the shop became the more we worked on developing formulas to think the cost.
As the competition increased, companies started to comprehend that the subscribers’ budgets were limited. Although movable communication targeted a niche, it speedily became wide spread and users became average citizens and not only the excellent few. In developing country where regular phone lines (Land lines / social Switched Telephone Network – Pstn) were scarce and barely ready in the Capital city, the movable phone became a widely suitable alternative to associate the discrete regions. Those two factors (Competition and new Subscribers segments) played the major role in making us look into reducing the Cost rather than only relying on addition Arpu. The pricing did not rely solely on how much we wanted to make anymore, we started to look at the impact of lower prices on our business. To keep the profit margin, we had to sacrifice the costs or at least operate them.
Companies that did not adapt to these changes found themselves losing their shop share. Although the quiz, kept the prices rather high, the markets started getting saturated, this brought the prices down. Determining the prices became more crucial than before for any firm who wanted to supervene in the Telecom field. In everyday products, the Fast spicy buyer Goods (Fmcg) the contribute and quiz, rules apply. discrete products have discrete approaches when it comes to pricing. By knowing your goods and classifying it (defining it), you are in a best position to price it. By doing so, you are ready for your next Marketing Mix concept, the Place.
Price, The Second P in The Marketing Mix
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