It has always been well known to marketers that pricing goods at 99 cents is a great tool in psychology pricing to boost sales of products on the shelf. From local convenience stores to national products, we see products everywhere that cost $9.99, $99.99. The 99 cents are everywhere. The reason for this pricing is because consumers tend to judge a product’s price by looking at the left-most digit. If the product is sold at $99.99 instead of $100.00, there is a psychological effect where consumers tend to treat this product as being worth $90 instead of $100, although the difference is only by 1 cent. Previous studies have shown that this strategy of pricing actually works, and the benefits of increased sales from this type of pricing outweigh the costs of losing one cent per product.

However, it could be argued that times have changed and that consumer preferences may have changed too. Robert Schindler, a professor at the Rutgers School of Business-Camden has suggested that “when consumers care more about product quality than price, just-below pricing has been found to actually hurt retail sales.” This could be argued to be true, as consumers become more adept in understanding the psychological effects of 99 cent pricing. Moreover, the market has also changed from the marketing era in the 80s to a new environment where consumers demand greater services than just the product itself. Pricing may no longer be the utmost priority of consumers, with the preference of quality products playing a bigger role. For example, if I am going to invest on a new high quality sedan like a BMW or Mercedes, I do not expect these automotive manufacturers to use this type of pricing. I purchase their motor vehicles because of their high quality and performance. If they use such psychological pricing, I would regard the manufacturers as a lower quality brand and it would negatively affect my desire to purchase cars from this brand.

Moreover, as governments around the world are finding the penny to be too expensive to produce and are abolishing the penny altogether in their currency systems, products are being rounded to the closest five cent intervals. Consumers now know that they don’t even save a penny from purchasing the product as the price is rounded. This would be a further setback to such psychological pricing as there are no more actual benefits to the pricing anymore, only the psychological effect left. I believe that in the future it is questionable if such psychological pricing will be effective anymore. Will the 99 cents strategy continue to prosper in this new era or will there be an all new marketing strategy to replace it altogether?

Article on Professor Robert Schindler’s Study on 99-Cent Pricing 

In the market, we often see numerous products that are very similar but with different brand names and hence different prices. A bottle of wine may typically cost $20, but with a brand name of Alfa Romeo on it, the wine now costs $70. A worthless ice scraper costs $50 with Saab’s name written on it.

So why are products with brand names written on it priced so high? Why is there a market for these branded products when other company offerings could offer exactly the same function? I believe that the key is branding of the company.

Other than being a decision heuristic for consumers, I believe that the most important point is that a good brand helps consumer convey their status and prestige compared to others. Brands names are one of the best ways to show a person’s personality qualitatively. A man that wears a suit made by Giorgio Armani, leather shoes made by Lloyd, and drives an Aston Martin super car has the symbol of wealth and extravagant tastes. Whereas another man with a casual dress shirt, and drives an estate car shows that they are low profile and very practical to their daily demands.

In the market, I believe it could be argued that there are different consumer types and that companies have to choose between what type of consumers to target. However, I believe that companies that opt to go for the route of providing a prestige brand are much better off. Companies like Apple, Lamborghini, Burberry are prestigious brands that are actively sought for by consumers and they don’t need to worry about the lack of market share. They also have a much higher leverage with pricing and the design of their offerings, as they are leaders in their market. Therefore, I believe that since consumers heavily view brand names as the key for the identity, companies should try to establish their brands to help better promote and improve the consumer’s identity. Of course, this involves a lot of resources to build up a brand as a prestigious product, but in the long run companies successful in doing so would have a greater chance of becoming a multi-million dollar organization.

Article on the Role of Brand Names in Our Consumer Driven Society

Many social networking sites today have all had their fair share of issues with information privacy, from LinkedIn, Twitter, and most notably Facebook. In the online business, consumer data is extremely important, and marketing teams would strongly desire to obtain and analyze these consumer databases to understand their trends and develop goods and service that correctly target these people. It would be a dream for a marketing firm to have access to all of the information for over 1 billion Facebook users at their disposal. Having such a database would also deem very valuable for these social networking sites.

One example would be the Facebook beacon program, that would track certain activities of Facebook users on participating websites, and then report those activities to the user’s Facebook friends as means of increasing brand awareness. There have been incidents of users that have logged off and have not given consent but their activities are still notified to their friends. This has been a breach in privacy, as users whether logged off or not are being tracked while on other websites. Eventually, settlements have been made for this privacy incident and the program ultimately abandoned. However this has left a mark for Facebook users to always be careful of what Facebook posts on your behalf. This case occurred during November 2007, years before Facebook’s first IPO. Now with the company going public, it is even more obliged to make more money from it’s client database as much as possible. It is questionable if there would be another beacon program from the relentless pressure of making money and ultimately would users of the networking site give up on Facebook?

I agree with Cindy Leung’s post about what social networking companies should think about in their corporate strategies. There are privacy laws that protect the human rights of users that use these social services. Sites like Facebook that are now enlisted on the stock exchange are even more pressured now to release and sell the data of their users to earn as much revenue as possible to please shareholders. With constant changes in their privacy policies and functions, in the short run a company may be able to earn some short term profit from newly fetched data that they may legally obtain, but they should understand that consumers will find these leaks. Instead, companies should look at aiming for long term sustainability and being socially responsible to maintain their consumer base for the long run so they can earn a steady stream of profit and not a short term spike.

2007 Facebook Beacon Article on PCWorld