MKT302 Mod 5 Case: The Marketing Mix: Price Introduction Pricing is often argued as highly important in determining the purchase decisions of customers, especially for the group of customer who tend to be much inclined towards price rather than quality as in the case of luxury products…
In this paper, the pricing strategies in relation to two different products, i.ee canned vegetables and aspirin will be illustrated to identify the influences caused by the variables on price determination. In this context, canned vegetables can be categorized as non-basic goods and aspirin as a basic good. Pricing Method of Canned Vegetables In relation to the pricing method of canned vegetables, the availability of substitutes can be observed prevailing at a high degree than that observed in the case of aspirin. Canned vegetables as a non-basic good is often observed to be highly influenced by demand fluctuation in the consumer market owing to various aspects such as economic volatility, consumer awareness and availability of sophisticated vegetable-packaged goods to substitute canned vegetables (SEOBook.com, 2013). Hence, a cost pricing method is often followed for canned vegetables due to its behavior as a non-basic good (Etzel, Walker, Stanton & Pandit, 2008). It is worth mentioning in this context that such non-basic goods are perceived to be highly influenced with the availability of substitutes which further reduces the switching costs of the buyers and therefore imposes significant influences on the pricing methods. Contextually, substitutes for a product tend to affect strongly the price elasticity of demand for canned vegetables (Magloff, 2013). Therefore, it can be stated that apart from its production cost and customer convenience, effects of substitute products also play a vital role in the pricing of canned vegetables. Pricing Method of Aspirin Unlike the canned vegetables, aspirin, as a pharmaceutical product can be categorized as a basic good which is essential for consumers. Hence, being a basic good, aspiring has to witness lower degree of substitute effects. Also, because of its necessity, the product has to witness lesser demand fluctuation as compared to canned vegetables. However, owing to the same reason, producers are also restricted from charging increasing prices for the product being more strongly influenced by legal as well as governmental and economic interventions than canned vegetables. As aspirin is considered as a basic product, the price for such products are most commonly determined through the value based pricing technique. Illustratively, from the perspective of consumers and the company, the value of aspirin is higher if someone perceives a headache. If the value of the product is higher, then the price of the product tends to increase wherein the value-based pricing method is deemed as most appropriate. Moreover, the dimension of value pricing depends on usage value, economic and perceived value as well as customer willingness to pay for the product, i.e. aspirin (Deloitte Development LLC, 2013). Compare and Contrast Between Cost Plus Pricing and Value Based Pricing Cost plus pricing, as followed in the case of canned vegetables is considered as the cost of manufacturing a service or a product that is required for profit making, often expressed as percentage. On the other hand, value based pricing, as followed when determining the price for aspiring, emphasizes on the perceived value of the good for the consumers and the willingness of customers to pay for the product. Similarly, cost plus pricing is favorable for huge volumes of business operated in the market that are dominated through price competition fundamentally owing to the ...
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5 Pages(1250 words)Coursework
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