Importance of Price

When it comes down to it most companies rely on the sale of their products to keep a float. In order for their products to be sold, the price at which they sell them is most important. There are some companies who charge the absolute minimum price they need to in order to cover their costs. Others charge outrageous prices because they want it to seem as if they products are of better quality than others. In the end after all of a companies costs are covered, the amount of money they continue to charge is just to benefit them

There are companies like Wal-Mart who charge very low prices for their products. They have become such a large organization because they are able to do that. They are able to keep down their variable costs by having their products produced in developing countries. This also helps to keep down their fixed costs because it cost very little to run factories in this country. They have a competitive advantage in their industry because they have such low prices. They do not have to worry as much when an economic recession hits as may Kohls. Wal-Mart is where people turn to get cheaper products. The pricing that this organization uses is what has helped them to be so successful. There is the controversy though, that they are using forms of slave labor to get these low prices, and at times has caused people to stay away from Wal-Mart.

On the opposite side of the spectrum are those companies who charge extremely high prices for their products. At times, their products may be made out of a better material than the cheaper ones, but other times the brand name of a product, or a product that is endorsed by a celebrity, leads to higher prices. For example, the two clothing stores, American Eagle and Abercrombie and Fitch are within the same industry, make the same quality clothes yet Abercrombie tends to have higher prices than American Eagle. Their total costs are probably the same but the profit that Abercromibe makes on each sweatshirt as opposed to American Eagle is more than likely higher. I know both stores and have shopped at both and I have come to notice how they both have good quality products, but one charges more than the other.

The type of event described above can be happening for one of two reasons. Abercrombie and Fitch may be a more well known brand name than American Eagle. If this is the case, they feel as if their brand is worth more so they can charge more, although their products are identical. Another reason this may happen is because they are looking to attract a certain kind of customer, which in my own personal experience I feel Abercrombie is trying to achieve. They want to attract more of the middle to upper class citizens rather the lower class ones. They may feel it is an image their company wants to uphold.

In essence, in order to run a good business, the prices of your products have to come into consideration. A company who sells their product at a higher price may not get as many customers, but at the same time still profits because they are able to charge such a high price for reasons such as branding. In the end each company is able to find some way to make a large enough profit to grow.

Would you rather shop at an organization that charges lower prices because they use forms of slave labor, or would you rather pay a little extra money and buy items from a store who provides Americans with jobs?