I was drawn to an article in Marketing Week recently discussing the elements to consider when deciding a price for a product. The main focus looked at the cost of goods sold and the profit margin generated versus a value-based pricing policy that took into account the perceived value of the product.
The article was part of a series offered by the publication, a mini MBA in marketing course, which covered similar subjects of a full-blown MBA in marketing. While appreciating that many elements need to be thought about when setting prices the true costs of a product rarely are.
To get a true understanding of the costs of a product manufacturers should include the environment and social costs and this should be reflected in the price offered. Elements such as the costs of the materials, the energy, the water used to make the product, how much it will cost to dispose of it at the end of its life or if it can be reused or easily recycled. Incorporating these details sends a strong message to consumers, raising awareness of the real impact they will make when buying products.
Yes there will be price fluctuations but with the limited resources available to us our purchasing mindset needs to change. Consumers continue to buy at will with little thought of how the product came to be or what will happen to it once they have finished with it. Countless reports demonstrate that buying more stuff doesn’t make us any happier all to the detriment of the environment and society.
Photo credit: Evaletova: Free Stock Images
Reviewing the tax structure would also help, rewarding those who use renewable materials, make it easier for the product to be dismantled for recycling and reprocessing or use low-carbon solutions. A policy to differentiate between those who continue with a business as usual approach and those who are innovating and respecting the need for change should be introduced.
Changing peoples’ mindsets is vital across all sectors, not least in education where we are training the future workforce. So courses, particularly in economics, should reflect the reality that existing models do not deliver an equitable society and they should help shape new thinking, incorporating the importance of environmental and societal impacts. This should not affect building a strong and resilient economy, in fact it should help foster it.
Different economic models need to be developed and understood to ensure our limited resources are utilised to the best potential. This will be driven by entrepreneurs who will find ways to disrupt the current ways but policy makers will also need to lead from the front to facilitate the change required.
It is possible to generate business growth and respect for society and the environment – we just need to find different ways of doing so.