importance of pricing in firms and franchises

1. B. THE IMPORTANCE OF PRICE IN FIRMS OR FRANCHISES
Price are very important in all types of organizations because price are key to revenues,
which in turn are the key to profits for an organization. Revenue is the price charged to
customers multiplied by the number of units sold. Revenue is what pays for every activity
of the company production, finance, sales, distribution, and so on. What’s left over is
profit.
To earn profit, managers must choose a price that is not too high or too low, a price that
equals the perceived value to target customers. If, in customers’ minds, a price is set too
high, the perceived value will be less than the cost, and sales opportunities will be lost.
Trying to set the right price is one of the most stressful and pressure-filled tasks of the
marketing manager, as trends in the consumer market attest.
• Confronting a flood of new products, potential buyers carefully evaluate the price
of each one against the value of existing products. For example, In the 1970s,
Kentucky Fried Chicken(KFC) usually offered two kinds of chicken, one
produced according to Colonel Sanders' original recipe and the other made like
the typical "crispy" fried chicken found throughout the southern United States.
Since the crispy chicken had been offered, both products had been priced the
same. The thought behind this was that the company's competitors usually sold a
variety of product and their crispy products at lower prices, and the less attention
on the both product by the customers. Table 2.1 shows the different price and
nutritional information between original fried chicken and “crispy” fried chicken.
• Many firms are trying to maintain or regain their market share by cutting prices.
Sometimes some firms or franchises need to make changes decrease their product
value as to maintain their customer loyalty. The price setting must be reasonable
in the market share and amongst their competitor.

2. Nutritional facts Original Fried Chicken Crispy Fried Chicken
Serving size(edible portion) 100 g 100 g
calories 241 kcal 288 kcal
protein 17.2 g 18.3 g
fat 14.0 g 18.2 g
carbohydrate 11.7 g 12.6 g
calcium 35 mg 28 mg
price RM3.10 RM2.70
Table 2.1: The difference between original and crispy fried chicken together with their
nutritional information.