Magic of Price

Id: 216047602

Name : Supneet Bhullar

WordPress username: supneetbhullar

 

Price refers to the numerical value at which a product is marked by a seller and the perceived useful value which is perceived by a buyer. Price is very tangible item of highly tangible product and can be varied .

Ciotti 2014

In the business world, out of the 4Ps , Price is the most influential and profitable. It is the only P which generates revenue as compared to other three which are related with incurring expenditure or investments (El Husseini 2014).

Price= Volume times demand – costs

Different companies choose different pricing strategies to target their segment of consumers. The retailers make considerations based on factors like competitor’s prices, goodwill, turnover and breadth of selection, Volume of sales sought (Knauth 1949, p. 2).

Image result for price strategy

Survey Analytics 2013

Usually companies choose from two approaches when pricing their goods.

  • High Price Strategy: They mark their goods at everyday high prices but they use the special discounts and promotions tactics to attract customers to buy their products.
  • Everyday Low Price Strategy: As the name implies, it refers to marking goods at everyday low prices. This strategy in itself is a tactic as most consumers can afford such goods.

Usually, high priced goods are often perceived as having high quality by customers though this is not always the case. People who are high income earners usually tend to buy these products. Sometimes, some companies following this strategy tend to use High -Low Pricing of their products. High -Low Pricing does increase profit through varying prices at some times, creating excitement through sales and through the possibility of getting rid of merchandise (El Husseini 2014).

Though this helps in reaching new customers, but its results are somewhat mixed. It does not guaranty the retention of new customers as they might not be loyal to the brand and be only taking advantage of discounts offered. However, the positive effect is that in case the new customers are too impressed with its quality, they may become loyal to the brand.

Another aspect is that it may affect the brands positioning in the eyes of customers who were its loyal buyers value by training consumers to wait for promotions or by lowering consumer price expectations for the brand (DelVecchio, Krishnan and Smith 2007).

Everyday Low Price Strategy on the other side helps retailers make profits as customers can easily afford the products. This strategy suits best in areas where low income earning people are living or the country is not very developed economically. Besides, it has been found that having occasional discounts does not that much effect as frequently and every low pricing strategy have. It has been found that under price uncertainty, when the consumers’ goal is to maximize savings, they will tend to choose the retailer they believe is cheaper more often (Danziger et all. 2014, p. 772).

Recently , in an event where Apple was announcing about iPhone SE, it gave a surprise to its fans. Founded by Steve Jobs, Steve Wozniak and Ronald Wayne in 1976, today, we all know Apple as a brand renowned for its innovative approach and expensive products mainly smart phones. It has positioned itself in market as provider of high quality, expensive products. Because of the high value associated with Apple brand , it has been able to charge consumers high price.

Image result for iphone se

Google Images, n.d

But opposed to its solid luxury product positioning, Apple has taken a move to price its new iPhone SE at very low prices with features like 4-inch screen, fast A9 processor and high-resolution, 12-megapixel camera. With starting price as low as $399 , it now costs just under $400 for the 16GB version and $499 for the 64GB model (Reisinger 2016). Though this is not very cheap but compared to other Apple products it can be said to be cheaper. For entire news follow http://for.tn/1Rw7CBK

According to sources, it is found that this strategic move of Apple aims to reach new customers especially in developing countries where cheaper devices prevail and also in developed countries for those who want smaller phones(Reisinger 2016).

Through this move it will be able to solidify its position in developing countries as more people will be able to afford it. This will obviously help it penetrate into markets in these countries and earn profits. However, it could lead to opposite consequences also. There are chances that it might have a negative impact on its already perceived brand value of being a high quality expensive product brand.

Well, now we are waiting to see what effects it has in the market and how it goes…..

 

References:

Cioti,  2014, Ten Pricing Experiments That Can Drastically Improve Sales, Photograph, retrieved 5 September 2016, <https://www.linkedin.com/pulse/20140606071836-56883908-10-pricing-experiments-that-can-drastically-improve-sales&gt;.

Danziger, S , Hadar,L & Morwitz, V 2014,’ Retailer Pricing Strategy and Consumer Choice under Price Uncertainty’, Journal of Consumer Research , vol. 41, Issue 3, pp.761-774.

DelVecchio, D, Krishnan, S & Smith, D 2007, ‘Cents or Percent? The Effects of Promotion Framing on Price Expectations and Choice’, Journal of Marketing, vo. 71, no. 3, pp. 158-70, retrieved 29 April 2016, <http://eds.a.ebscohost.com.ezproxy-b.deakin.edu.au/eds/pdfviewer/pdfviewer?sid=4e4cd6e8-ab7b-4847-b84d-dd02eb348f23%40sessionmgr4002&vid=7&hid=4103&gt;.

El Husseini, S 2013, EDLP versus hi-lo pricing strategies in retailing: literature review and empirical examinations in German retail market, Deutsche Nationalbibliothek,retrieved 1 May 2016, <http://eds.a.ebscohost.com.ezproxy-b.deakin.edu.au/eds/detail/detail?vid=11&sid=4e4cd6e8-ab7b-4847-b84d-dd02eb348f23%40sessionmgr4002&hid=4103&bdata=JnNpdGU9ZWRzLWxpdmUmc2NvcGU9c2l0ZQ%3d%3d#AN=759967&db=e000xww&gt>

Google Images n.d, iPhone SE, photograph, retrieved 5 September 2016, <https://www.google.com.au/search?q=iphone+se&espv=2&biw=1222&bih=707&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiOjLa-oPjOAhVClJQKHV0ZCscQ_AUIBigB#imgrc=yUyjEDbZoDX9sM%3A&gt;

Knauth, O 1949,’Considerations in the Setting of Retail Prices’, The Journal of Marketing, vol. 14, no. 1, pp. 1-12.

Reisinger, D 2016,’Here’s The One Surprise From Apple Event Yesterday’ media release, 22 March, Fortune, 5 September 2016, < http://fortune.com/2016/03/22/apple-event-surprise/&gt;

Survey Analytics 2013, Using Surveys To Set Pricing Strategies, Photograph, retrieved 5 September 2016, <http://blog.surveyanalytics.com/2013/01/using-surveys-to-set-pricing-strategy.html&gt;.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s