Originally Posted By: HTSS_TR
Originally Posted By: Merkava_4
Originally Posted By: Vern_in_IL
The cost of the oil is dependent on how many commercials and endorsements they pay for.
That's it right there. That's why Chevron Supreme is only $11.77 at Walmart while PYB is $16.47
I think it is more like company think they can get away with that price for what ever reason, they would not sell for less and they have better profit margin.
Remember CD vs cassette and DVD vs VHS ? Both CD and DVD were costing much less to produce but sold for more because they think they can away with it.
It isn't as simple as manufacturing cost + marketing + ... so this is the sale price. It is more like price X multiply with volume Y = largest profit, then $X is the price.
You have it exactly right. This is Microeconomics 101.
There is a demand curve for every product and it's the job of its maker to price it at the profit maximizing level, which is neither too high nor too low. Try this thought experiment. Let's say that PYB retailed at $30.00 a jug. The margin per unit would be obscene, but volume would be very low. Let's say that PYB retailed at ten bucks a jug. Volume would soar, but profits per unit would be tiny. Clearly, the profit maximizing price level must lie somewhere between these two extremes and this is how products are actually priced.
This also illustrates the power of brands and explains why marketers invest money in things like advertising, sponsorships and promotions. A well build brand is gold and the cost of brand building must be less than the brand equity gained since marketers would not otherwise spend money doing it.
A product must bring in at least enough revenue to cover the cost of putting it on a shelf. If it can't then that product will soon disappear, but cost-based pricing is not a feature of any market economy.
