Cost, Price & Value

15-Jan-2022: 

Cost, Price & Value: Explained in short in the Marketing parlance

Cost:

• The dictionary meanings are: the price paid to acquire, produce, accomplish, or maintain anything; an outlay or expenditure of money, time, labor, trouble, etc.
• Cost means a price that must be paid for something or a sacrifice.
• Cost most often refers to a specific amount of money that a seller wants for the item they are selling. However, cost is also used more generally to mean whatever the price of an item is.
• But in today’s world of Marketing, Cost is an objective term which generally refers to all types of expenses incurred to produce, procure, create or manufacture an item.
• Cost is of Objective nature. It remains constant under unchanged circumstances.

Price:

• The sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale.
• Price is used mainly of single, concrete objects offered for sale; charge, of services:
• But in today’s world of Marketing, Price is an objective term which generally refers to Cost plus a margin amount which is called profit, which rewards the maker / producer / procurer / creator / manufacturer.
• Sometimes the Price may be less than the Cost under certain undesirable constraints.
• Price is of Objective nature. It may change on various different reasons for the same cost.

Value:

• Intrinsic worth, merit, or importance of an object;
• Monetary or material worth, as in commerce or trade.
• Value, worth imply intrinsic excellence or desirability.
• Value is that quality of anything which renders it desirable or useful:
• Value is of Subjective nature. It doesn’t change on its own.
• Sometimes the Value of an Object can be changed which is called the “Value Addition”, by undergoing certain processes.
• Value is sometimes divided into two types:
• Objective, Physical, Utility; which remains constant.
• Subjective, Emotional, Esteem; which varies from person to person, time to time, etc.

Marketing Concepts

10-Feb-2012: Marketing Concepts

The Marketing concepts under which organisations have conducted marketing activities have undergone some sort of evolution during the period of human existence. Chronologically they are : 

Exchange Concept : This is the primitive & fundamental concept of marketing. Exchange of goods and services between two agencies called buyer and seller, or exchange of goods and services for money or barter system. This involves the process of obtaining a desired product or service from someone else by offering something (money or any other item) in return.

Production Concept : This concept is one of the oldest, and suggests that the consumers will like to buy the products which are available easily, cheaply & widely. So the marketers must have a mass production facility (efficient production) with low price (cost efficiency) and make it available very near to the customers (mass distribution). This concept is normally adopted when the Company wants to expand.

Product Concept - This is the next step of evolution of marketing concepts. It depicts that customers will go for those products which offer quality, utility, features, performance, value, benefits, etc. So the marketers must improve the products in an innovative way & continuously. This is more often accompanied by a suitable pricing, distribution, promotion (all the 4Ps of marketing) programme.

Selling Concept : This concept involves aggressive selling and promotional effort. “The purpose of marketing is to sell more stuff to more people more often for more money in order to make more profit”. This kind of marketing is practised for goods & services which buyers normally don’t like to buy, like insurance, dictionaries, encyclopaedia, etc. The aim of the marketers is to sell what they produce, rather than make what the market wants.

Marketing Concept - This concept was evolved in the 1950s, and for the first time the attention was shifted to Customers. Instead of concentrating on the Products / Production / Selling, the business became "Customer Oriented". The "Make & Sell" philosophy gave way to the "Sense & Respond" philosophy. Instead of finding the right customer for the product, the marketer now has to find the right product for the customer. The perceptive contrast between the selling and marketing concepts – selling focuses on the needs of the seller, marketing on the needs of the buyer. This concept holds the secret of the company being more effective than its competitors in creating, delivering & communicating superior value to the targeted customers.

Holistic Marketing Concept – In the new marketing environment, companies wonder how to operate & compete. Marketers in the current age are increasingly recognising the need to have a more complete & cohesive approach that goes beyond traditional application of marketing concepts. This concept is based on the development, design and implementation of marketing programs, processes and activities that recognise their breadth and inter-dependencies. Holistic Marketing recognises that “everything matters” with marketing - and that a broad integrated perspective is often necessary. The important components are :

Integrated Marketing,

Internal Marketing,

Relationship Marketing,

Social Responsibility Marketing.

The Holistic Marketing Concept is an approach to marketing that seeks to recognise & reconcile the scope & complexities of various marketing processes.