What is going on with price at WalMart vs Macy's? There are four different pricing strategies that frim can employ. Everyday low prices, high/low pricing, new product (skim and penetration) and status quo. WalMart emoploys every day low price as they work to keep the cost to the consumer low. This EDLP approach can lend itself to consumers viewing the items as cheap though. WalMart does not drastically change the price week to week nor offer many sales incentives. Macy's on the other hand is always changing their pricing to offer low priced offers on some items while keep the price premium appears higher to keep the brand prestige. Our wedding registry is at Macy's and there are constant sales on the items that we have picked even though the daily price is substantially (30-40%) higher than the sales prices. This helps to the customer to feel like they are getting a deal on better quality products due to the name brand on Macy's.
The Dilbert of the week highlights competitor (aka status quo) pricing. Many companies base their pricing structure off of their competitors. Airlines are a good example of this as they match their competitors prices on a certain route. Dilbert again pokes the marketing department as it highlight how pricing can become confusing and drive customers to uninformed decisions.
There are also four pricing objects: consumer, competitor, sales and profits. Each of these can be connected to the various strategies like competitor and status quo pricing. These are also integral in the net market contribution of a company. These different factors can be connected to a part of the equation: NMC = MDxMSxSPxCDxM%-ME. A sales oriented firm looks to sell the greatest number of units which would command the largest market share (MS). Firms that look to create the greatest profit should concentrate on the total net market contribution. The goal of those is to have the largest amount. For competitor focused pricing selling price (SP) and market share (MS) are important. MS creates a comparison to the competitors and selling price is a direct comparison to their competitors prices. A customer focused firm would want to compare market demand, market share and selling price. The firm would want to meet the market demand by creating a selling price that meats the value defined by the customer.
Personalized marketing is going to be come more and more prevalent as companies continue to track consumers as they are browsing the internet, walking through stores and posting about companies on the internet. This is my Facebook page from today and the adds on the side are focused on my likes and information. A UCONN MBA program is trying to lure me from WNE. AT&T is trying to lure me from Verizon and Cox. And the main add is trying to use a third party to get me to buy another Subaru. These adds are constantly being displayed in various forms on the edge of every webpage I visit and are relevant to what I an looking for but also repetitive as they rarely encourage me to explore a new website or switch companies.
Also when being a consumer, do you evaluate the total cost of a product (total chain cost)? Why do consumers will drive
father to save that extra few cents per gallon when collectively it still costs them more?
This was also discussed in class as consumers look for the extras when making purchase like
stop and shop gas points. It is important to check evaluate the total chain cost for the product because in the long run there could be hidden cost that are unseen. The total chain cost for a cell phone is certainly more than the $100 paid at the beginning of a two year contract as the environmental cost of mining and disposal as well as the monthly fee add up to thousands of dollars when all is said and done.
Companies also look to create inelastic markets where prices can be at a premium (think about the profit strategy) and still maintain a large market share because consumers will still pay that prices. More on inelastic markets on the Pharmasim discussion.
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