356 The Marketing Book
sharply with companies’ practices on the cost
side, where highly sophisticated costing sys-
tems are very much the rule rather than the
exception; however, as already argued, it is not
cost that determines price: it is the customer
and his/her perception of value. A costing
system, however refined and sophisticated, can
tell us nothingabout the customer – a demand
measurement system, on the other hand, can
tell us a lot.
Conclusion
Price is probably the most important but least
well managed element of the marketing mix. A
key reason for this deficiency appears to be a
lack of understanding of how customer con-
siderations impact upon pricing, i.e. how the
demand side ‘works’. This chapter aimed to
show how price features in buyers’ purchasing
decisions and how price sensitivity develops as
a result of different influences. The intention
was to highlight the key principles of a cus-
tomer-oriented approach to pricing and pro-
vide the reader with sufficient building blocks
to enable the construction of his/her own
perspective within the particular pricing situa-
tion he/she might be facing. It seems appro-
priate to conclude the chapter with a simple
reminder: ‘anything that reduces the buyers’
cost of evaluating an alternative... will
increase buyers’ sensitivity to low-price offers’
(Nagle, 1987, p. 62). So, welcome to the won-
derful world of price comparison sites, online
auctions, interactive bargain hunting, instant
information and ‘borderless’ shopping – hope-
fully you can survive (in) it!
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