Month: November 2010

I went to see the new Harry Potter movie this weekend and the theatre was absolutely packed. At a time when the movie theatres are clearly in trouble due to piracy and free downloads, it was amazing to see so many people lined up to see this new movie.

Because of the association with the books by J.K. Rowling by so many people, the Harry Potter movies are one of the rare occasions where people such as myself who would normally not pay much to go see a movie finally decide that it’s worth it to go see a movie on the big screen.

Consumers need to be convinced of the value of a product and that they are receiving a benefit that either matches or exceeds the cost of that benefit.

I felt that the value I received was far greater than the price(cost of the ticket, popcorn, driving to the theatre and searchiing for a parking spot, searching for a seat) was well worth it.

For those of you who haven’t seen it yet, please make the effort. It was very well done.

Since we just finished talking about the price P in our class, I figured I’d talk a little bit about how companies use different formulas to come up with their final price.

There are several methods companies can use to come up with their selling price. I wanted to just outline a few.

Markup on Cost Method

Often used by resellers who acquire their products from suppliers. A percentage is put on top of the cost of the product to arrive at an initial price. In addition, companies could use a target such as their ROI(e.g. 20%) and use that as a markup tool.

Markup on Selling Price Method
A clever method used by retailers in order to advertise that they receive only a 5% markup. However, consumers most times do not know that this markup could be on selling price rather than the cost. Since the markup on selling price is always lower than the markup on cost, it is very easy for retailers to say they “make a little while customers save a lot”

Cost Plus Pricing
Using a fixed amount to add onto the cost of a product.

Break-even Pricing
A forecasting tool used by marketers to see how much of a product needs to sell before the company can break even. Unfortunately, this kind of pricing does not account for how much demand there is in the market which can make it inaccurate at times.

Market Pricing
One of the most common methods for pricing. Consists of aiming to find out what consumers in a target market are willing to pay for any given good. This method of pricing also seems to be the most logical since marketing is focused around the consumer.

Backward Method
A method where a price is first set, and then from there a product is developed as well as the promotion and distribution of that product. Can help when a price for certain kinds of products has already been established in the market.

Competitive Pricing

Setting prices that are based on the prices that competitors are setting. A company can either set their prive below competitive pricing to achieve more sales, above competitive pricing to establish a brand, or use parity pricing so that it is in line with other competitors.

Bid Pricing
Pricing goods using a case by case method in terms of which consumers is willing to pay the highest price for the product.

Although this doesn’t cover all pricing methods, this definitely summarizes the most common ones used in the market today. As you can see, price setting doesn’t just stop at cost markups. Marketers use several methods depending on the product and the objectives that a company wants to achieve.

Till next week.

https://blogs.ubc.ca/kimmmn/

I thought that Kim Nguyen’s post about Frito Lay’s noisy chip bags was quite creative. In her post, she talks about Frito Lay’s switch to eco friendly bags and the negative response it was getting. Rather than recall the product, Frito Lay stuck with the design of their new bags and made an educational campaign out of the product. The big push that Frito Lay was making for sustainability has obviously outweighed the negative response of noisy bags.

Great post Kim.

Till next week.

http://markettingblog.blogspot.com

Looking at some marketing blogs this week, this one sort of got me thinking. This post talks a lot about how the push for Christmas marketing has already begun. I guess I have to check my calendar because the last time I checked, Christmas was in December.

However, this seems to be a regular trend that we tend to see, especially around a lot of shopping malls and outlet stores. Recently in 296, we talked about consumers and their temporal state. Based on how a consumer is feeling at a given point in time, their chances of making a purchase can be affected.

How can companies use this knowledge to better market their goods/services? Seems like it would be a good idea to take advantage of a holiday that is coming around the corner. Maybe a holiday that is all about being happy and king to one another? Perhaps.

When consumers are in the holiday mood, it is a safe assumption to make that people want to shop be it for themselves or loved ones. Therefore, an opportunity arises for marketers to build their strategies around the holiday season. The earlier this strategy is in place, the more time there is for it to effect.

Marketing strikes yet again.

‘Till next week.