Classic economic theory says that the importance of price is its relation to supply and demand. Price decreases, and demand increases, as more people can buy the product. Supply increases to meet the demand. But then, because of competition, profits also decrease. Some producers abandon the product because it is no longer profitable. This reduces the supply again; as aresult, price increases. With the increases in price comes an increase in profitability and therefore in production. The cycle begins again.
However, the clasic view is no longer completely valid. This is especially true in good economic times and in a more affluent industrial society. In such a society, demand increases for goods that were formerly luxuries. Levels of productivity are high, so thereis always a surplus of many products. Manufacturers have to generate demand in order to sell their goods. In this situation, marketing must be oriented toward the consumer, not the producer. Consumer-oriented production leads to market segmentation and product differentiation. It has also led to te development of the newer concepts of monopolistic competition and symbolic pricing."Monopolistic competition" is a combination of "monopoly" and "competition". In a monopoly, a single supplier governs the total suply of a necessary product. In competition, there are many suppliers, and all of their products are the same. Probably neither condition exists in pure form. In monopolistic competition, every producer has a "monopoly". This is because no two manufactures' products are exactlyalike. If a consumer insists on smoking Marlboro cigarettes, he has to buy Marlboros. Winstons are cigarettes, too, but they are not indentical. Today´s marketing communicators try to persuade consumers that their own brands are unique. Each company tries to make it appear that it has a monopoly. The appearance of monopoly or uniqueness thus become a feature of that company´s product.
Thefunction of symbolic pricing is to convey an idea to consumers. The price becomes a symbol, rather than just a reflection of supply and demand or of production costs. The saying "You get what you pay for" is firmly embedded in consumers´ minds. A price that seems too low can actually slow demand, because it may indicate an inferior product to the mind of the consumer. The first home permanents costtwenty-five cents and were a failure. A new package and a new price of $1.25 made them successful. A price that seems high can increase demand because it suggests quality and desirability. Many people buy expansive brands to make themselves feel important and to impress others. In reality, studies show that there is little if any correlation between quality and price. Yet consumers believe that thereis; and in a marketing society, they rule. Symbolic pricing is also effective for products whose quality cannot easily be judged by consumers. In the case of furniture, for example, potential buyers are heavily influenced by price and brand name reputation.
Because price says something to consumers, it is often a significant aspect of an advertising campaign.
Lateoría económica clásica dice que la importancia del precio es su relación con la oferta y la demanda. Disminuciones de precios, y la demanda aumenta, a medida que más gente puede comprar el producto. Aumenta la oferta para satisfacer la demanda. Pero entonces, debido a la competencia, las ganancias también disminuyen. Algunos productores de abandonar el producto porque ya no es rentable. Esto reduce elsuministro de nuevo, como consecuencia, los aumentos de precios. Con el aumento en el precio viene un aumento en la rentabilidad y por lo tanto en la producción. El ciclo comienza de nuevo.
Sin embargo, la visión clásica ya no es completamente válido. Esto es especialmente cierto en los buenos tiempos económicos y en una sociedad industrial más ricos. En una sociedad, el aumento de la demanda...