Channel Pricing Case Study

1. Do you believe that prices should reflect the value that consumers are willing to pay or should prices primarily reflect the cost involved in making a product or service? Defend your answer.
When it comes to determining the sales price of the company, the managers of the company must look at multiple variables such as expenses and competition. Most of the time companies will look at the amount of expenses they have put into their products to determine the sales price. Companies must look at their profit margins to ensure that they are generating enough revenue to continue success and be able to continue to grow through the years. While maintaining a healthy profit margin will also give the company the ability to lower the sales price if …show more content…
I do not believe this is a good managerial decision to do channel pricing. There are many factors that must be considered when do channel pricing. The first is to determine the price that is desired for the end consumer of the product. This price will help determine the amount of channels that will be used in order to reach the end user. This will also help determine the pricing structure through each distribution channel. The second factor is to determine the channel pricing with the considerations of other financial obligations. In the reading it states that, “Channel pricing must be developed in conjunction with other financial considerations (credit, payment terms, stocking, returns policy, product warranty provision, territorial protection, co-operative funding programs, end user support, installation)” (Marketing Channels). The third factor is the mangers must consider the reseller margins. The fourth factor should be the prices charged for the products must be comparable to the competitors in the industry. The sales price must not be too high or too low. The last factor is that the suppliers can have different prices for different product lines. The price should reflect the desirability of that particular product