Pricing and packaging

GOOD DAY, everyone. We are still on marketing activities. We have covered market research as a marketing activity. This week, we will explain pricing and packaging as TWO other marketing activities.

There are a number of ways in which a seller can determine the price at which the goods or services can be sold. One way is through the use of the equilibrium price. This price is found by using the forces of demand and supply.

DEMAND AND SUPPLY

Demand refers to the quantity required by the consumer at a particular price and at a particular time. Consumers tend to demand more, the lower the price.

Supply refers to the quantity put on the market at a particular price and at a particular time. Producers tend to supply more, the higher the price.

The price at which demand and supply quantities match is known as the equilibrium price. At that price, demanders are satisfied and suppliers are satisfied.

Reference can be made to an economics textbook for a graph showing demand curves and supply curves. See if you can identify the equilibrium price and the equilibrium quantities demanded and supplied. This information can also be found by looking at a combined demand and supply schedule such as the one below:

From the schedule above, we can see that $20 is the equilibrium price, since at that price the quantity demanded is 600 units and the quantity supplied is 600 units. Therefore, both demanders and suppliers are satisfied, and there is neither surplus nor shortage. The market clears, and so $20 is the market-clearing price.

There are other methods of pricing, such as penetration pricing, cost-plus pricing and competitive pricing.

Penetration pricing is a method of pricing that is used for a product that is just entering the market. A low price is chosen and when the product is no longer new, the price is increased.

Cost-plus pricing is a pricing policy that totals all the costs of production and then adds the desired profit to it to obtain the selling price.

Competitive pricing is where sellers price their products close to the price of their competitors.

PACKAGING

The package is the outer wrapper or container for goods. Packaging takes place after the goods have been produced. Packaging is done by the production department, even though the marketing department creates the package and the label and does the branding.

There are a number of purposes of the package, including:

■ Improving the presentation of the good.

■ Helping to prevent spoilage, thus preserving the life of the product.

■ Ensuring packaged goods cannot be easily tampered with.

■ Handling becoming easier to the seller and the customer.

■ Allowing easy branding of packaged goods.

■ Saving time, because it facilitates distribution.

■ Increasing profits, since more goods are likely to be sold.

■ Making goods more attractive.

■ Protecting goods from dust and dirt.

■ Keeping in more stable condition for longer periods, since packaged goods can be kept longer than those not packaged.

■ Preventing health hazards that could result from use of the product.

PRESENTATION OF PACKAGES

Attractive packaging is an important marketing tool. An old, established product in a new and improved package usually enhances the marketing potential of the product. Packaging decisions must be made on the form, size, shape and colour of the package. The package must appeal to the consumer. The label is a part of the package. A label has certain functions, such as:

■ It identifies the product and/or the brand.

■ It sometimes grades the product, e.g., chickens and eggs.

■ It describes the product in terms of size, expiry date, ingredients, nutritional values, directions for use, warnings about use and misuse, and the registered office of the manufacturer.

Now try this question:

1. (a) What is meant by the term ‘packaging’? (2 marks)

(b) State a suitable form of packaging for the following items (i) fresh vegetables (ii) shoes (iii) a computer (iv) meat (4 marks)

(c) Discuss THREE reasons goods are packaged. (6 marks)

(d) Discuss THREE points that should be considered when selecting a package for the good. (6 marks)

(e) Which department is responsible for designing the package, and which department is responsible for placing the package over the good? (2 marks)

Total marks: 20

Next week ‘s lesson will explain branding and sales promotions as TWO other marketing activities. Take care.