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Does suggested retail price represent the true value of a product?
Results so far:
| Yes | 16% | 59 votes | Total: 370 votes | |
| No | 84% | 311 votes |
Yes
by J David Childs
Created on: March 25, 2009
In a market economy, the value of a product is based upon two primary functions. One function is that of the consumers' perceptions of a product's utility. Defined in broad terms, utility is a commodity at one extreme end of the spectrum and a status symbol at the other end of the spectrum. Using this model, all products fall somewhere on the axis, defining each product's utility.
The second function defining the value of a product is whether the effort made by the consumers to acquire the necessary resources in exchange for a product is something consumers wish to do. For purposes of this debate, effort may include cash accumulated from payment for labor/services (income) or leveraging credit.
Together, utility and level of effort, the value of a product may be measured. It is only the manufacturer that gauges each function to determine the suggested retail price, the value of a product.
A manufacturer is typically producing a product for the sum total of targeted markets. No matter how markets are segmented, the suggested retail price is set at a standard price across all targeted markets and where the value of the product is maximized (based on the two primary functions that determine value). The suggested retail price set by the manufacturer reflects what the manufacturer believes to be the value of a product across all targeted markets. The markets will determine whether the manufacturer is correct in establishing this price point.
Some will debate that manufacturers determine price on a cost-plus basis to ensure adequate margins. Margin consideration is a factor in sustaining a financially healthy business. However, the suggested retail price reflects the value of a product, regardless the amount of margin that may be required or hoped to receive. Pricing should be based on market, i.e., product value, not cost-plus. If the manufacturer cannot meet margin or contribution objectives using product value analyses, then the manufacturer should seek opportunities to lower costs for meeting the margin objectives or stop manufacturing the product.
Many may argue that the suggested retail price is a means to inflate a product's price. Actually, an inflated price is more accurately defined through the deceptive practice of setting minimum pricing. Such pricing practices do not reflect a product's value, they are unlawful, and they are not of the spirit in competitive market economies.
Through the suggested retail price, resellers of a product have the ability to respond to market behaviors and set the price of a product below the suggested retail price or up to the suggested retail price. Such elasticity does not reflect an inflated price.
Furthermore, resellers may have different motivations when lowering the price of a product that may have nothing to do with its true value. Such practices are designed to be deceptive. Fortunately, there are laws that permit the manufacturer to cease supplying products to a reseller because of such pricing maneuvers relative to the manufacturer's suggested retail price. Thus, the suggested retail price is retained and representative of the value of a product.
In closing, the manufacturer who sets a standard suggested retail price is setting a price point that reflects a product's value in all markets where the product is targeted. The value of a product is that which is primarily based on utility and the market's willingness to pay at the highest price. If the suggested retail price is accurate, anything greater than the suggested retail price will cause diminishing demand and a product's value decreases because the amount of effort to acquire a product outweighs the product's utility. A price lower than the suggested retail price, of which the reseller has the ability to offer, reflects a product's value in a specific market segment. Yes, the suggested retail price (a standard price point for a product) represents the true value of a product.
Learn more about this author, J David Childs.
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No
by C.B
Created on: February 01, 2009
Walk into every shop in your area and look and compare everything. Apart from your one off shops, all your brand shops or well known shops ahve the same products.
What does this suggest?
for instance, clothing. Same styles, same brands in, same materials used - same clothing. And yet, you walk in some well to do shops and you can be paying an arm and leg for it and you go into one which is known to be cheap and the same product is 70% less?. Why is this.
Well to do shops used to make their products in that country/county/state . Now where are they getting all their stocks? Well , they are getting them the same places as the cheaper shops. Sure, the poeple making them are probably going to paid a few pence more, but a few pence more, for the same crap made, is just still, a few pence more when you think about your well known , well made products store.
Furniture is the same.
A little shop full of wood furnishings, the workshop next to it but the products are around the same prices as these well known places. But you go into one of these little shops and you know what your getting though for your price. You select the wood, you select the material and the shapes and the style, and they usualy come back to you say - We will have it in a week for you.
You go to a well known furniture shop and select the same old furtishing as everyone well, wait a week or two for it to be delivered after paying a reasnable amount for it, as you think, then a stupid charge for the delivery, and you have it a year and then suddenly, the materials ripped, the wood cracks very easily.
Comparing this with the furniture you got at the little shop with the prices which you are happy to pay for somethign you know which will be good quality and it is, and if they do break easily, you go back to the pace, you have it out with the people there, isntead of some little boy in the shop whos just come out of high schoola nd doesn't quite know what he is doing.
You lose money but time also when it comes to the value of products. At the moment the way it has got, our money just goes down the drain for no one can be bothered to actulay make a quality product, they would much rather pay some little crappy amount to people in the middle east.
Slolwy and hopefully, time will hcange the way poeple think as it has done over this centuray already and iduvuduale shops will open up again, the big brandd shops will become scarse again and our products will be at their true value for we known who has made it - usually the factory down the road, the anoiying little kid who has grown up to be a good tradesmen and has a beautiful skill with woodwork - it is that kind of value poeple want again instead of thinkign about the poor poeple in the middle east getting a few pence a day to make something they have no idea how cheap it has just been made.
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