by Olufemi Oyedele

Created on: March 26, 2009

No. Suggested retail price does not represent the true value of a product. Value is a relative term. It means different things to different buyers. If you are expecting a visitor and you need to spice your food very well so that your visitor will enjoy it, you will value a bottle of salt more than if you are eating the food alone. You may buy a bottle of whisky at a higher price if you are giving it to a friend as present than you will pay if you wanted to drink it alone.

When prices of products are being determined by marketers, they do not consider value representation alone, they also consider the law of demand and supply. There are some products which have higher profit margin than others. For example, in term of groceries, food items that are bought everyday do not have higher margin like goods that are occasionally patronised like Gillette shaving sticks, colour telivision, microwaves etc. The values that people place on products by buying them or not determine or suggest retail prices.

Products are also used by different people for different reasons. The use into which a product will be put may suggest its value to the diffrent buyers. For example, if I see a bowl that I will like to use as flower pot instead of my broken clay pot that is in use now, and another person sees the same bowl and think of buying it for the use of his or her dog as feeding bowl. Since I can still use my broken clay pot, I may not be ready to value the bowl as the other person. That is why marketers do not consider the value of a product alone in suggesting retail price. They consider the value as well as what buyers are ready to pay.

In some cases, products are sold less than the purchase price. Retailers therefore increase the price of moving goods to cover the loss margin of non-moving goods. Retail prices may also be determined by finding unit cost of products and adding administrative cost and profit margin usually between 15-25% depending on durability of products. If a product has been priced in this way and demand for the product is high, retailers will jerk the price up. This increase in price does not represent increase in value. If one argues that price determines value, then consumers should be allowed to pay a representative of what he or she considers a product is worth in terms of money.

Last week in the Hay Market in Edinburgh, Scotland, United Kingdom, a man bought an olden-day tea kettle for 5.00 sterling. The same pot was auctioned at George Street Auction shop

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