Price and Non-Price Factors
Very often, importers in developed countries do not have adequate confidence in the quality of goods produced in India and developing countries. For example, Indians had to sell their storage batteries 10 per cent cheaper in Saudi Arabia than US and European batteries even though the quality was comparable. Lower price may become inevitable to make our products acceptable in foreign markets. However, in some cases Indians have established themselves well e.g. transmission line towers, sugar mill machinery, textile mill machinery etc.
If products are well differentiated and they have built up a brand image for themselves, manufacturers are in a position to charge comparatively higher process. Brand names like Dunlop, HMT, Bata, GKW, Lucas, L&T, Kirloskar etc., have already built up a good image and these products are able to realize much higher price. It may be pointed out here that 75 per cent of German imports and 75 per cent of US exports are attributable to some degree of product differentiation.
The price a purchaser is willing to pay often depends upon the frequency of purchase. In the case of durable consumer goods, products having a snob value and gift items is not the material factor. People may be willing to pay a very high price if the particular goods catch their fancy. This applies particularly to handicrafts manufactured by developing countries.
There appears to be close association in the consumer minds between price and quality; the higher priced goods carry a much greater conviction about quality than the low priced goods. In this respect, it may be useful to note that it may be easier to sell in developed countries with a higher price tag but in developing countries, lower price may help increase sales. In general, price constitutes a barrier to demand when it is too low just as much as when it is too high. Above a particular price, the article s regarded as too expensive, and below another price as constituting a risk of not giving adequate value. What is stressed here is that lower prices do not necessarily lead to higher sales. And in periods of inflationary price rise, a reduction in price may have an adverse reaction on the consumers and may, in fact, lead to reduction in demand rather than in increase in demand.
In the case of industrial goods, price is not likely to be an indicator of quality. A buyer of industrial goods in more keen to check what he gets for the price he pays than an average consumer. His knowledge of products and their quality is more exact, if not perfect. A technically sound product, steady availability at a reasonable price and comprehensive after sale service, are the more important factors in the case of industrial goods.
In the case of engineering products and equipment, both before and after sales service are very significant factors, and assurance of after sales service particularly is much more important than a lower price. Before sales service in the case of engineering goods include
- Advising the purchaser about the relative suitability of competing products for his requirements and
- Demonstrating the use of his products. For example, TELCO sent their mechanics to Zambia for maintenance of buses and training of the Zambian personnel. After sales service includes
(i) Rectification of genuine technical failures in the product.
(ii) Educating the users on the use of the product and providing training for its maintenance,
(iii) Free service during the warranty period, and
(iv) Ensuring supply of spare parts and components after the warranty period.
On the other hand, in the case of consumer goods, service before sales, as for example attractive packaging and good finish tend to be more important. MIGROS, a department store of Switzerland, requires the suppliers to pack the products in such a manner that they can be put immediately on the shelf without further packaging.