New Food and Farming Ventures - Resource Manual September 2003
Chapter 3 · Marketing
Price – Narrative and Guidelines for Facilitators
In the narrowest sense, price is the amount of money charged for a product. More broadly, it is the sum of all the values involved in a product. Increasing customer perception of value through differentiation and effective promotion increases demand for products; premium-priced products not supported by customer demand will fail due to insufficient volume.
Price is the only element in an organization’s marketing functions that produces revenue; all other elements represent costs. Price is also one of the most flexible elements of the marketing functions. Unlike product features and distribution channels, price can be changed quickly.
Pricing and price competition is the number one problem facing food and farming ventures. A common mistake is setting prices without considering all marketing functions. For example, promotional costs, such as advertising expenses and time spent making sales presentations, need to be built into price. Another significant cost is distribution, or physically moving the product from its place of production to the place where customers make purchases. Costs can also come from broker fees, spoilage, and revenue collection. Any cost involved in the production, promotion, distribution, and servicing of products should be built into prices set for products.
It is important to guard against under pricing for another reason: price lends a value to the product in the mind of the customer, and under pricing can lead the consumer to believe the item is of little value or of inferior quality. When pricing products, suppliers place a value on their product and company. They are not just selling a product. They are selling a package that includes the unique features and benefits of the product, company, and customer service.
Guidelines for the Materials in this Section of the Manual
The materials in this section are limited to three publications, all of which come from Alberta Canada Department of Agriculture, Food and Rural Development. These were chosen because they were fairly short, and each had its own strengths as resource pieces for clients with questions on how to price their products. The first gives an overview of the essentials of pricing, the second describes the three main pricing strategies, and the third includes additional details on how to determine what to charge for products.