Watch out for smart-phone pricing
If you reject the subsidy, you’ll actually have $230 to spend two years from now, and $20 every month you keep the phone beyond that. Android phones like the MyTouch 3G have thousands of apps that wil…
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What is the best price a retailer can charge for his product?
One of the most difficult, yet important aspect, a retailer must decide as an entrepreneur is how much to charge a product. While there is no one single right way to determine pricing strategy, fortunately there are some guidelines that will help to take this crucial decision.
There are certain pricing guidelines such as competition-based pricing, cost-plus pricing, marginal-cost pricing, demand based pricing, supply based pricing, etc which sets thumb rule to decide price. These principles are specific to the characteristics of the product and the prevailing market condition.
Retailers face the complicated task of setting and changing prices for many items they carry. A typical grocery store in the United States now carries around 31,000 items in hundreds of product categories (Kahn and McAlister 1997). Each week, a retailer changes prices on over 4500 items (Levy et al. 1998). Besides the sheer number of price change possibilities, the considerations that enter the retailer pricing decisions have become very complex.
Sophisticated demand forecasts based on scanner data, a wide variety of manufacturer discounts, the push towards category management, and marketing intelligence on competing retailers’ prices may all matter, and have been incorporated in recent analytical research (e.g., Basuroy et al. 2001, Kim and Staelin 1999, Wedel et al. 2004). Most recently, Nijs, Srinivasan, and Pauwels (2006) find that when retailers rely on past prices to set future prices (i.e., past-price dependence, price stickiness, or price inertia), lower category margins are observed, while demand-based pricing is associated with higher category margins.
Often we see many articles speaking about different pricing strategies related to advantages, reasons behind using specific strategies and so on. Out of all these, the arguable demand based pricing, suites retailers with the aim of increasing his profit.
Let us see some of the advantages of demand based pricing for a retailer:
1. In setting retail prices of brands in categories with higher purchase frequency.
2. In setting retail prices of brands in categories with larger number of SKUs.
3. In setting retail prices of brands in high-growth categories.
4. In setting retail prices of brands in storable categories.
5. In setting retail prices of brands with greater share of the retailer private label.
6. In setting retail prices of brands with greater product-line breadth.
7. In setting retail prices of high-share brands.
8. In setting retail prices of brands with higher demand sensitivity.
9. In setting retail prices of brands in expensive categories.
10. In setting retail prices for products with deep discounts from the manufacturer.
Companies who are well versed and have strong understanding on these principles classify the conditions under which retailers rely more on demand-based pricing. Our insights offer great opportunity for retailers to evaluate their pricing structure and help them to arrive at quick logical decisions.
References:
1. Basuroy S., Murali K Mantrala and Rockney G Walters. 2001. The Impact of Category
Management on Retailer Prices and Performance: Theory and Evidence. J. Marketing 65
(October), 16-32.Benkwitz, Alexander,
2. HelmutKahn, Barbara E., Leigh McAlister. 1997. Grocery Revolution: The New Focus on theConsumer, Addison-Wesley Pub. Co, Reading, MA.
3. Levy, Daniel, Mark Bergen, Shantanu Dutta, Robert Venable. 1998. Price Adjustment at
Multiproduct Retailers. Managerial and Decision Economics. 19 81-120.
4. Nijs, Vincent, Shuba Srinivasan, Koen Pauwels 2006. Retail-price drivers and retailer profits. Marketing Sci., forthcoming.
The global market is continually being given attention by the Ford owned brand Volvo. One of the growing markets for the Swedish brand is New Zealand. Recently, to increase sales of the C30 in the said country, Volvo announced that they would price the C30 just within the reach of many car buyers in the said country.
The price tag that would come with the smallest Volvo vehicle today will read $49,900. The said introductory price will stand until the end of the year or after Volvoâs allocation for the year is depleted - whichever comes first.
After that, the two-door hatchback will be sold starting at $54,990. This means that for those who are interested in having a Volvo C30 would then need to avail of the introductory price owing to the huge difference between it and the standard price. The price would then climb as Volvo is planning to introduce two new variants of the Volvo C30.
The first one will be equipped with a 2.4-liter naturally aspirated gasoline engine while the second will be powered by a turbocharged diesel engine. The choices are the logical progression of the C30. As the model gains popularity, Volvo sees it fit to provide more choices to meet the specific needs of Volvo C30 buyers.
Currently, the Volvo C30 is equipped with a 2.5-liter turbocharged five-cylinder engine that is very much capable of producing 220 units of horsepower. The said power is transferred to the front wheels through a precision engineered six-speed automatic transmission. The gearbox can also be operated on manual mode for the more performance tuned drivers.
The front wheel drive configuration of the Volvo C30 gives it a high level of performance and less energy wasted from the engine to the wheels. It shares its platform with the Ford Focus which in itself has proven its worth in the market and in the industry by emerging as a leader in its own class.
One of the most notable design concepts used in the Volvo C30 is the rear glass tailgate. It has been borrowed from the Volvo Safety Concept Car developed by the company. The said design feature gives the Volvo C30 a distinct rear styling. The unique taillight construction also adds to the distinctiveness of the carâs tail end. In fact, the rareness of the carâs rear end is one of the major aspects of the car as according to Volvoâs design director Steve Martin. âThe distinctive tail lamps ensure that no one will be uncertain about which car they have in front,â says Martin.
The handling of the C30 is also one of the strong points of the hatchback. The suspension for the front wheel is composed of MacPherson struts while for the rear, the Volvo C30 employs a multi-link suspension configuration. This gives the C30 a good ride comfort and handling capability. With its good looks and performance, it would seem that owners of the C30 will seldom hide this hatchback under their chosen Volvo car cover designs.
New York Times fighting itself over iPad book pricing?
The New York Times is embroiled in an internal battle over what to charge for iPad books, sources at the newspaper said Tuesday night. Those who control the digital side of operations want to charge just $10 a month, but SAI hears that print managers want to charge between $20 to $30 for the same content. Traditionalists at the Times are allegedly worried that existing customers will cancel …
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Apple moves to slash TV show pricing for iPad launch
The iPad is expected to be available to consumers in April and according to a report by the Financial Times, Apple may be putting some bait out there to make the tablet more attractive for consumers. One of the selling points of the iPad is its entertainment value since users will not only be able [...]
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Apple to Remain ‘Nimble’ on iPad Pricing
Apple could cut iPad prices if the device isn’t selling well, the Wall Street Journal reports.
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Macmillan books breaks ranks with pricing for Kindle reader
One of the nation’s six biggest book publishers, Macmillan, has broken ranks over the $9.99 pricing model for Amazon.com’s Kindle e-reader.
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News Corp head favors iPad pricing over Kindle’s
News Corp. chief Rupert Murdoch today openly dismissed Amazon’s e-book store in favor of Apple’s in his company’s fiscal results call on Tuesday. The executive, who also owns publisher HarperCollins, argued that the Kindle store’s $10 or less pricing “devalues books” and punishes those selling hard copies. He instead favored Apple’s deal with HarperCollins for iBooks and the iPad, which he …
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