Price Gaming is a Tricky Business

The principal microeconomic issue at work is supply and demand. The author invokes a number of economic theorists (both liberal and conservative) who endorse price gouging out of a belief that it is simply the natural manifestation of a capitalist society that relies on supply and demand. There is a belief that preventing price gouging allows consumers to act with little consequence for their actions. According to this line of thinking, a business is well within its rights to raise prices because they should respond to public demand; at other times, there is little demand, so they are wise to take advantage when there is significant demand. Moreover, economic theorists have argued that price-gouging is positive because it makes people question whether the item they are considering purchasing

The key to successful pricing is to match the product with the consumer's perception of value.

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.

Consumers always base their decisions on price. The price of an item is important as it can influence consumers to purchase the product or not. If a product is out of their price range most people aren’t likely to purchase the product unless

Paying any more or less will make you question your decision and the quality of the item. It will also make yourself wonder if your repeated buying of a product is actually worth the price you pay, such as the example of Starbucks mentioned in the book. The price of the product is not the only factor that decides supply and demand. Changes in the price of substitutes, complements, amount of income, and population also affect the amount of demand for a product. People also tend to add more value to products they enjoy and rebuy. When we love a product, we expect everyone else will too. With this mindset, we also tend to value these items more and therefore price them higher than their true value, and we tend to compare the other equal options as a subpar option. Everything ties back to relativity when it comes to what people want. As mentioned by Ariely, when offered something at a fair value and then something not as good for free, such as the Snickers and the fun sized snickers respectively, people will usual choose the free item because they value their money more than the item. With this in mind, we have to decide what is more valuable: money someone is willing to pay for the coveted item or the item

Price is an important characteristic, which makes customer’s opinion about the place. The highest might scare a lot of customers, while low ones might

Research Challenge Identifying the optimal price for a new product is a critical step in the innovation process – and correcting the price of an existing product is a necessary component of successful brand management. With the wide range of pricing research techniques practiced in the industry, it is not always clear which technique best addresses the business issue at hand. This paper describes the most common methods used for consumer goods pricing research and offers guidelines on when – and when not

In fact, Price and promotion are two factors of the “4 P’s” discussed in marketing communication, which have severe effects on a customer’s outlook towards a retail environment with regards to their brand image (Kotler, 2010). Concerning price, there is the cost for the seller and for the customer (Profit +), and as for Promotion, the products benefit mainly to the customer (Eugene McCarthy). For example, you are only taking into consideration the

Odd- end pricing is another pricing strategy that is used by many retailers. Odd-end pricing is the “ubiquitous practice of expressing a price so that it falls just below a round number” (Harris and Bray). In other words it is the technique of pricing items with an ending of nine versus using a solid, round number. Consumers are “alleged susceptibility to “price illusion” (Huston and Kamdar, 1996). This price illusion is what many experts consider the illusion that business give to the consumer that because a price ends with .99 on the price tag it is pricing is consider to be less. The history of odd-ending pricing became present with the invention of the cash register, many business owners would use this as a way to prevent employees

The most personal of these three factors is the direct psychology of pricing, from items costing $0.01 less than an even dollar amount to overcharging for soda at a fast food restaurant, prices are specifically engineered to optimize profits for a company. According to Judith Holdershaw, writer for the Marketing Bulletin, the practice of ending prices with $0.99 is used because the human brain, in recognizing that $4.99 is closer to $5.00 than $4.00, has to do an extra mental step to carry the one. This may seem like an insignificant step, however when these memories are viewed in hindsight, the brain glosses over the extra step to convert the $0.99 to $1.00, which gives the consumer the impression of a lower cost, even when the nominal price is practically identical. (Holdershaw) By pricing their products at one cent below a round number, producers can also establish price points, such that when manufacturing and transportation costs would suggest a product should be sold at $5.25, a producer can sell the product

Quite often, consumers purchase goods and services based on their perceived need. Upon making the decision that a need is present and a solution is available consumers are more equipped to react to that need. Although previously perceived that consumers will normally accept prices as presented by suppliers that remains to not be the case. Consumers assess and process prices based on past purchases and other psychological process they went through previously such as persuasive marketing strategies, accessibility of the goods or services and possibly information gathered from prior purchasers of a product. There are countless options that are available to consumers. Consumers are then faced with the choice of choosing the product that best fulfills their need at that given point. Consumers who are knowledgeable regarding prices will be aware of the approximated price for products (Zhao, Zhao & Deng, 2015).

Pricing strategies can vary from offering relatively stable prices across a wide range of products, which is known as Everyday Low Pricing (EDLP) or Promotional Pricing (PROMO) which involves emphasising deep and frequent discounts on smaller sets of goods (Ellickson and Misra, 2008). The EDLP store adopts a constant everyday low prices across a wide range of product categories, whereas PROMO or Hi-Lo stores occasionally price a category at the regular price or at a deep discount (Bell and Lattin, 1998). Ellickson and Misra (2008) argue that the concept of choosing the best pricing strategy is a complex process as it forces firms to balance the preferences of their consumers, as well as taking into account their competitors performances in terms of the store pricing and market share.

Pricing is an important marketing strategy which helps organizations leverage and effectively use decision-making in a vertical and horizontal fashion to impact the demand for the products as well as bring a competitive effect ADDIN EN.CITE Noble1999552(Noble & Gruca, 1999)55255217Noble, Peter M.Gruca, Thomas S.Industrial Pricing: Theory and Managerial PracticeMarketing ScienceMarketing Science435-4541831999INFORMS07322399http://www.jstor.org/stable/19318110.2307/193181( HYPERLINK l "_ENREF_11" o "Noble, 1999 #552" Noble & Gruca, 1999). Effective pricing strategies help to optimize the revenues of buyers by maximizing revenue for the organization. For retailers, they have embarked on data collection activities which provide crucial information to enable them make effective pricing strategies for the present market conditions. This information helps the retailers to understand the price sensitivity of demand as well as how to influence the price elasticity of demand towards the success of their marketing strategies. This first part of the paper evaluates the type of information collected by typical retailers in contrast to information that is collected by retailers who run consumer loyalty schemes. It also finds how these pricing strategies apply to the classical economics theory of supply and demand and discusses the factors that affect the price point purchase behavior of consumers. The second part looks at the purchase decision-making

Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).

Price can serve as an indicator of quality for consumers. The higher the price of a product, the more perceived risk a consumer incurs. In general, consumers often associate a high-priced retail product with higher quality than those of lower pricing; however, some researchers believe that this quality and price relationship is too simplistic. Prices are used by marketers in retail stores in order to appeal to different consumers on different levels. The consumer uses comparative judgments in order to evaluate a potential purchasing decision. The consumer utilizes reference prices in order to make these comparisons. Reference pricing is a subjective price level that is used by the consumers to determine if the product is at an acceptable price for purchase.