Week 8 - Pricing Decisons Flashcards
Why is pricing one of the number 1 criteria marketers are worried about?
- People seem to be more concerned with price now.
2. Price is a powerful and accessible lever to profits.
What does a firm’s brand communication say?
“We value you as a person,” but its pricing often says “We value you as a waller.”
Warren Buffet: If you’ve got the power to raise prices without losing your business to a competitor, you’ve got a good business, however if you don’t you’ve got a terrible business.
Disagree. As it depends if you’re a cost leader or a product differentiator.
The main (firm-external) factors determining prices are:
- Competitive influences
- Customers’ demand elasticity - how much customer’s are willing to change their behaviour depending on the price change.
What is customer’s demand elasticity?
- It is the change in the % in sales resulting from a % change in price.
- If customers are very price sensitive, you’ll lose many even with only small increase. In this case customer’s demand is elastic.
Price increase is bad for consumer goods.
Eg. toilet paper, milk, nobody cares what brand.
What about luxury goods - are price increase a good idea”
Demand elasticity is lower.
Some cases consumer wants item more when its more expensive because consumers are irrational.
Imagine doubling your current prices. If you’d lose less than half of your customers, it’s probably a good move.
Are there differences between B2C and B2B markets?
Yes it is a good move in B2B. However, B2C maybe not.
What do marketers exploit?
customers who are rational. men women discrimination
Companies should make price practices fair/transparent and simple! (without hidden cost, additional charges, etc)
“free delivery”
Is there an ethical way for discrimination?
adult, concession, child, etc.
Why do some brands not provide discounts?
It can indicate that the company is not confident in its quality.
It will make other people who bought the watch without a discount angry.
What are discounts? What do discounts do?
- They make you think you’re getting a good deal.
- Excess stock.
- Encourage spending.
- Endowment effect
- Pressure; deadline; stock scarcity
- Price acts as an intangible signal of a product’s quality
Do you think a share can be good value if it its 50% below the peak?
no. a share price is what it is. there’s no highs or lows. it goes up and down.
Can you think of a target group that is not price sensitive?
- Children.
- Price should not dull our responses to the inexpensive world.
