Theory question 103
Pricing(a) Explain the following concepts in marketing: (i) product concept; (ii) selling concept; (iii) production concept; (iv) societal marketing concept. (b) A product costs ₦4,000 to produce. The producer decides to sell the product for ₦6,000. Calculate the: (i) markup; (ii) percentage markup on cost; (iii) percentage markup on selling price.
Show the model answer
(a)(i) Product concept: consumers prefer products of the best quality and features, so the firm concentrates on improving the product.
(ii) Selling concept: consumers will not buy enough unless persuaded by aggressive selling and promotion.
(iii) Production concept: consumers prefer cheap, widely available products, so the firm concentrates on efficient mass production and distribution.
(iv) Societal marketing concept: the firm satisfies customers profitably while protecting the long-term welfare of society and the environment.
(b)(i) Markup = ₦6,000 − ₦4,000 = ₦2,000.
(ii) Percentage markup on cost = 2,000/4,000 × 100 = 50%.
(iii) Percentage markup on selling price = 2,000/6,000 × 100 = 33.3%.
Show the formula and working for each calculation.