Here is story told of the conversation between the restaurateur who decides to put a peanut rack on the side of the bar, and his accountant expert. The plan is to sell peanuts for $1 a bag, the cost price being $0.30 cents.
The accountant insists that the restaurateur must allocate a proportion of overheads into the peanut operation, including rent, utility, equipment, depreciation, decoration, salaries, wages, cleaning, soap, and so on.
These allocated costs, plus a rent for the amount of counter space taken amount to $5,200 a year which, on the basis of a sales level of 50 bags of peanuts a week, amount to $2 per bag, demonstrating that, at a selling price of $1 per bag the restaurateur would be losing $1.30 on every bag!
When it comes to pricing issues, there is always a conflict between Marketing and Accounting, however, both parties are equally to blame. Accountants fail to understand the essential role that marketing plays in an organization. Many accountants know quite a lot about business in general, but very little about marketing.
Marketing is seen as a less worthy activity, but it is not easy to understand the complex decisions that have to be made about an activity that is concerned with human behavior rather than with things than can be counted. There is also the issue of marketers who are unprofessional in the way they manage the marketing function.
So, the blame lies just as much on the side of marketers.
A solution to the conflict is pricing. Demand exists only at a price, so price is an important determinant of how much of a certain product will sell. Price has also an interactive effect on the other elements of the marketing mix, so it is essential that it is part of a conscious marketing scheme, with objectives which have been clearly defined 🤔