Price Setting as the Art of War - Essay Example

Price Setting as the Art of War An effective method to know how much customers are willing to pay for a good or service is by comparing the company’s product with the competition. For example a company that sells tennis shoes establishes its price at $50. The company can retrieve data on how much other similar tennis shoes are selling in the marketplace. Based on the results of the study the company can determine whether or not its target market is willing to pay more or if the tennis shoes of the company are overpriced.

Response (Nicole)The method you mentioned for retrieving information about what companies can do to determine how much customers are willing to pay for goods or services makes sense. Past historical data can provide insight about the willingness of people to pay more for an item. Take for example food items such as vegetables. The prices of vegetables fluctuate a lot due to supply and demand factors. If in the past customer was willing to pay $3 for a lettuce, then the company knows that it can increase its price to that threshold in the future.

Past data has to be analyzed to determine how much volume of sales was generated at higher price points. Response (classmate 2)It is always a smart strategy to gain insight directly from the customers. The use of surveys can help a company determine if customers are willing to pay more for a good or service. The survey has to be well design to include questions associated with the subject. For example you can ask a customer if he is willing to pay more if the item the company sells increases in quality.

Historical sales data can also be useful because they establish purchasing patterns. 2.The prices of sporting events in different spots vary depending on the team. For example the New York Yankees can charge higher entrance prices than the Florida Marlins due to the fact that New York is a bigger marketplace. The record of the team also influences in the pricing for sporting events. Teams with winning records can charge more than team with losing records. I consider pricing to be the art of diplomacy.

Prices are set based on set variables such as quality, value, and marketplace. Items sold in flea markets are going to be cheaper than items sold at the mall. Response (Robert)The sporting industry has unique characteristics due to the fact that the customers are fans of the game. A fan is usually a loyal follower of a team that will support his favorite team independent of the results. The matchups of the game influence on whether or not a person buys a ticket. For example in basketball when the L.A. Lakers or Boston Celtics come to town fans are eager to watch these teams play.

Teams with superstars such as the Miami Heat trio of starts also attract more audiences. The ticket prices when these attractive teams come to town are typically higher. Response (Zebkraybyia)Price setting can be considered the art of war due to the fact that firms compete against each other for consumer dollars. In certain occasions companies actually enter into price wars. A price war occurs when two or more companies start lowering their prices in order to increase their market share. Usually there are not winners in price wars due to the fact that the profitability of all companies involved is hurt as a consequence of selling their goods at lower prices.