Reply to each of the 6 postings individually. Each response does not have to be too long. No more than a paragraph is really needed. Probably just a few sentences each will work.
Price could be one of the bigger elements in any industry and market, it shows how consumers value a product that a company is coming out with. We as consumers we have decisions to make just like the producer of the product. When a company is making a product they have to think about the profit that they could get out of producing and selling the product, then how to sell it to the consumers so that they would want it to buy it, also how much is the right price to put it at, and whether would everyone think its a fair price. Then the consumer would have to think about is this product something that I need or would use a lot to make it worth buying, is the price in my budget and is the price a low enough price for me to justify buying it to myself and others.
Everything at cost is a nice idea. It would mean that everything would be cheaper, and more people could even afford it. From a business standpoint this is not the most profitable way. Charging what people would pay adds value and money to the product. With the way the economy works it gives these businesses more money to hire more people and build even more things. The market is meant to expand and with everything costing close to cost, there is no room for it to expand. While there is a downside to letting things be charged for value. It does allow these companies to charge whatever they would like, just because people would buy them. It can cause issues for consumers, and make it hard for them to purchase things they like. With the downside out of the way it really is the best way for a business to expand. It is necessary to let the companies grow, so that more jobs are filled and more product is created. If McDonalds only charged for what a burger costed, they would never be able to save money to start making french fries as well. It is the way the market needs to flow.
This is an easy decision for me as a business man. Prices should absolutely reflect the value that customers are willing to pay for a service or good. My stance is based on one question, why does anyone who starts a business do it for? The answer is simple, to make a profit. If you were to make it where the cost of all items or services are that which they cost wholesale, there would be zero profit in the world and therefore our capitalistic society that we live in. If the cost to the consumers were that of the wholesale amount, there would be no return on investments for investors and therefore, no investors. The growth of our economy would all by cease to exist as we know it. Don’t get me wrong, I’m just as excited when I find something on sale “at cost” whenever I find it. But I also know that the reason that that item is at that price is either because I’m buying it in bulk or it has run out of shelf life and needs to be sold in order to make space for the next round of inventory in that store/company. However, there is no business benefit to selling things as cost.
If the product or service is desirable, the vendor should be able to inflate the prices based on what the consumer is willing to pay. The profit margin should not strictly be dictated by the cost of the product/ service. The ability to maximize the profit will be crucial for a company to thrive because the demand for their product/ service might be short lived. In addition, there will always be operating costs that are not directly related to the specific product. If the company offers a novel product that consumers are willing to pay top dollar for, they should be able to capitalize on their idea. The profit margin on other products/ services that they offer might not be as significant and they might rely on the higher profit margin products to maintain growth.
Especially in today’s market where social media and what the stars wear plays a big role in society’s fashion choices, price certainly reflects what the customer is willing to pay rather than reflecting what the cost of the product is to make or produce. Often times, a consumer is willing to pay more based on a brand name or if someone they idolize such as a celebrity wore the same shirt, pants or accessory. Let’s take Nike for example. For the most part, consumers are willing to pay more for a plain black or white shirt as long as it has that Nike check up in the top right corner of the shirt. Nike prices there cotton t-shirts around $25 while you can buy a pack of 4 black or white shirts for about $15 at Tj Maxx or Ross etc. The only difference? The brand name on it! This is the same exact reason some people are willing to pay $1100 for Gucci and Prada shirts or shoes, when it reality it cost the company no where near that much to create those products. PEOPLE PAY FOR BRAND NAMES!! Another thing that allows companies to up-charge on certain products is the rarity of the product. This is very evident in the sneaker world. The fewer amount of pairs made, the higher the company can sell them for and the people who flip them for a profit can sell them for ridiculous amounts of money. A great example of this is the Nike Air Mags. IF you aren’t familiar with them, they are the shoes Marty McFly wore in Back to The Future. Originally when they came out, there were so few pairs that you had to get into a raffle to even have the chance of purchasing them. Nowadays, there are so few pairs on the market that the price tag on them is out of this world. If you look on flightclub.com, the 2016 Nike Air Mag is price at $45,000, and yes, you read that right.
Prices indeed should reflect the value consumers are willing to pay because many consumers would ignore and criticize the thought of something more expensive than what they normally would purchase the item for. When setting prices, the value should indeed be the most important concern for any business. Keeping the consumer satisfied is almost enough, but completely satisfying them with not only the price, but the deliverance. More than half of the consumers sort products within their budget in order to get the best deal so valuing the value isn’t only vital, but very beneficial for the consumer and the company. Once satisfying the consumer is done then now the next step would be the competition. It would be unwise to set your prices too much higher or lower without a good reason. Setting the price too high can scare off consumers and which could passably cause a company to lose consumers. Setting the price to low will cause the company to throw profits away and potentially cause the business to go in debt or out of business really soon.