Sending a Message with Pricing

When Zicam was introduced, its price was $10.99, whereas the price of the average cold remedy was $5.29. Thus, Zicam cost almost twice as much as the average cold remedy. This price was mainly based on the companys financial requirements. It was not based on consumer research to determine how much the consumer would be willing to pay. The company simply added to its production costs the margin needed to cover all of the marketing costs and trade margins. The product also carried an unconditional guarantee. The customer could send back the bottle with a receipt and Matrixx would send back whatever the customer had paid for Zicam.

The premium price of Zicam had several ramifications . First, it sent a signal to consumers that this was not an ordinary cold remedy. It had to be something special to justify the price. Second, it prevented the brand from gaining distribution in some of the smaller convenience stores. Third, it could be cost-justified against the competition if the consumer took the time to do the financial analysis. For example, a competitive zinc lozenge sold for about half the price, but it was good for only one cold. Zicam was good for two colds, and some people had actually been able to stretch it to three or four colds.