Marketing

MARKETING: PRODUCT AND PRICE

WALMART AND TARGET

Demand Pricing

Demand pricing fluctuates with consumer needs. For example, gas station owners typically use demand pricing for fuel, and during peak travel periods, the cost-per-gallon increases. Likewise, when people typically stay off the road, prices decline.

Demand pricing for items like fuel can also work as a "loss-leader." That is, a company might set a two-hour period after the big local college football game, with a price-per-gallon equal to the total score of the game. Consumers, eager for the deeply DISCOUNTED fuel, will line up for gas, but the station will partially recover the loss through the sale of additional items in the attached convenience store, while earning public goodwill that may lead to repeat customers and future sales.

Competitive Pricing

Tightly competitive industries, or industries where there is already an established MARKET leader and market price, feature competitive pricing. For example, the town's second pizzeria has less room to set its own price because the competition already set the price for the community. Therefore, the new shop may slightly undercut on price in order to earn the patronage of price-conscious consumers.

Markup Pricing

Most retailers use markup pricing. They resell items they purchased from a wholesaler, and then set a sale price to the final consumer that consists of a the original wholesale price plus the retailer's marked-up profit margin. For example, a book store may sell books for 10 percent over the costs the store incurred to buy its inventory.

This markup must defray the non-inventory costs of running the business (e.g., labor, insurance, rent) and supply an additional PROFIT margin.

Psychology of Pricing

Business owners must be sensitive to the emotional impact of price. Irrespective of the DOLLARS and percentages of profit margins, consumers like getting a deal and respect companies that provide good quality at a fair price.

Types of...