Marketing: Strategic Innovation in Globally Diverse Markets Essay

Amazon can use 3rd degree price discrimination to divide customers into different groups and charge a different price to customers in different customers in different groups, but the same price to all consumers within the group. The firm will charge groups of customers prices relative to their demand elasticities. We can illustrate this on a graph:

This is the pricing of different products within the same product range at different price points.

Those consumers that have flexibility to choose when they demand a product will benefit from price discrimination. An example of this would be workers that have the ability to take a holiday at short notice might be able to benefit from a heavily discounted price. This is second-degree price discrimination and it can be shown below on the diagram.

As a consumer, we all get frustrated when we think a listed price is “too high” whether it is a necessity, and we have to buy it, or we just really want it. Some of the largest complaints by consumers today are directed towards the cost of goods. Marketing research has shown us that the costs of some items are being intentionally raised based on aspects of the individual who is making the purchase. The manipulation of prices can be broken down into three main issues: price fixing, price gouging, and price discrimination. Are there any positive or beneficial reasons to do this? Yes and no, the following paragraphs provide information about each practice individually.

Predatory pricing is an exclusionary act by which a firm, in order to create or maintain a monopoly power, lowers its prices below the profit maximizing level in order to push rival firms out of the market or prevent them from ever entering the market. In the long run, this results to be a detriment to consumers. Once the competition has left the market, the company can then raise prices to a supracompetitive level and recoup the losses suffered by predatory pricing. This results in higher prices for the consumer. With no alternative product available, the consumer is left with no choice but to pay the high price.

Cost-plus pricing lead to a complicated pricing structures, since distributors and customers negotiated separate product prices from manufacturers, introduced incentives, let prices vary from customer to customer, covered some products by contract and some don’t etc.

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets. In today’s society we see price discrimination in many places and you don’t even realize that it is price discrimination. Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. It essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand. There are three different types of price discrimination. First Degree Price Discrimination involves charging consumers the maximum price that they are willing to pay. Second Degree Price Discrimination involves charging different prices depending upon the quantity consumed and lastly Third Degree Price Discrimination which involves charging different prices to different groups of people (EconomicsHelp, 2015).

Price: Sensitive to the price elasticity of its product and overall consumer demand- i.e. offering low to high prices

2. How would leveraging capabilities with respect to the Indonesian market differ between an Australian/New Zealand producer of computer software and an Australian/New Zealand manufacturer of automotive parts?

Dynamic pricing is essentially the fluctuation of pricing based on various factors, this includes demand, number of customers, and popularity. When I think of dynamic pricing, I instantly think of concert tickets. There is a continuously high demand for concert tickets, especially for more shows by more popular artists. The pricing of tickets for any event constantly changes up until the last possible second. One representation of this was a Twenty One Pilots concert I attended last year. The original price of the ticket, when I purchased mine, was around thirty-five dollars; however, throughout the next couple of months the tickets ranged from sixty to around one hundred and fifteen dollars. The cause of this was two reasons. One, the concert

Marketing has evolved through a change in production and consumption due to the advent of new technology (Ranchhod, 2004). The development of technology has also driven the globalisation of communication. During this period, consumers are facing a variety of choices (Jackson and Shaw, 2009). Thus, companies need to actively embrace these changing factors to grow their business and succeed in the marketplace.

The Internet has changed and will continue to change how people shop and new competition through the Internet will continue to shape the market.

Price discrimination can be defined as when the same good or service is sold at different prices to different consumers. If we look at this definition of price discrimination, for an example, we can show that price discrimination can be seen in the entrance tickets of parks such as Universal studios; this is due to the fact that there are discounts for children and senior citizens. (Phlips L. , 1983) However, this can be seen as not being discriminative at all due to the fact that if the price difference full reflects the difference in the cost of carrying the good from the seller’s location to the buyers’ location.

Further, there are three different types of price discrimination. First-degree price discrimination, otherwise known as perfect price discrimination, is when a firm charges every customer exactly how much they are willing to pay for that good and charges a different price for every unity consumed. Some examples include car sales and roadside sellers of fruit and produce. Furthermore, second-degree price discrimination is when firms discriminate though volume discounts. This is when a firm charges a different price for different qualities and allows buyers to purchase a higher inventory at a reduced price. An example of this would be quantity discounts for bulk purchases. While benefiting the high-inventory buyers, it can hurt the low-inventory buyer who is forced to pay a higher

This chapter sets out the rationale for price discrimination and discusses the two major forms of price discrimination. It then considers the welfare effects and antitrust implications of price discrimination.