Question

In: Economics

Make sure the answers are correct, well explained, thoughtful, and have no grammar mistakes. DO NOT...

Make sure the answers are correct, well explained, thoughtful, and have no grammar mistakes. DO NOT COPY answers from Chegg or other websites. The answer should be unique and original work. The answer should be no less than 300 words. Thanks in advance.

Tell us the following: A time when you bought something based on each of the pricing strategies.

- Clearance

- Coupons

- Bundling

- Quantity Discount

- Odd Pricing

Also, what are something you are elastic AND something you are inelastic as it comes to pricing?

Finally, what is a retail brand that you think has a GOOD advertising campaign, and WHY? Also, what is a retail brand that you think gets good public relations/publicity and WHY?

Solutions

Expert Solution

  • Clearance: Clearance sales are mostly used by businesses operating in a cyclical/seasonal demand environment, as a sales promotion and inventory reduction technique. Hence it's one of the most prevalent sales promotion tactic in the apparel industry and there have been quite a few instances where I have bought sweatshirts towards the end of the winter season in a clearance sale, for half the price.
  • Coupons: Coupons are a good strategy for businesses when they want to attract new customers, launch new product lines, maximize sales volume, reduce old stock and increase the store footfall. It's also used by businesses where the markup price on the product/service is marginally higher than the cost price. I frequently use coupons while ordering take out from the fast food chains, where coupons are now an industry norm.
  • Bundling: Bundling involves clubbing of different products/services into one combined offering. It is used where the businesses offer product/services which are complimentary in nature and when bundled together would enhance the total utility of the consumer. I've used many offerings which are a bundle of various product/services but one which stands out is Amazon prime, which is a bundle of music streaming platform, OTT streaming platform, a loyalty platform and other allied services.
  • Quantity Discount: This sales promotion technique is usually employed when the product/service in context possesses one or more of the following properties: low-value, requires repeated buying, has high price elasticity or offerings in the said industry are homogenous. I've particularly seen retailers belting out quantity discount for the FMCG products which involve zero to low consumer engagement and abundant impulse purchasing. I bought a dozen cartons of cranberry juice last week for the retailer provided a 30% discount, if one bought a dozen cartons.
  • Odd Pricing: Odd pricing is a psychological pricing technique which involves ending the price of a product/service with a odd numeral to attract attention, making the product seem cheaper and encouraging retention. This technique is used widely by retailers selling high priced consumer durables. For example: Setting a selling price for a TV at $499.99 instead of a $500. This creates a psychological impression in the buyer's mind of the product being cheaper and encourages retention. I bought a washing machine this year owing to the odd pricing technique.

Price elasticity of a product/service depends on various factors such as the nature of the product (its location on the necessity-luxury continuum), number of close substitutes, proportion of income being spent on the product, price of switching to a substitute, frequency of use and personal taste and preferences of the consumer. For me, I'm very price elastic to everyday FMCG products, stationery items and products with low levels of differentiation amongst competitors. On the other hand, I'm quite price inelastic to products/services which are differentiated across the market (such as consumer durables and electronic gadgets) and products I use habitually (a particular beer brand).

I think NIke has a really good advertising campaign. Back in the day, Nike and its competitors used to cater almost solely to marathon runners and sportsperson. This all changed in the 1980's when Nike's "Just Do It" advertising campaign came into being. Nike was able to transcend its product from something which was aimed at the sport personnel to something every person could use and benefit from. Instead of selling its products, Nike aimed at selling the "act of physical activity" and the benefits of using the product (such as a better physical health, protection from cardiovascular diseases, a fitter lifestyle etc.) The campaign still holds its own even after almost four decades of it being launched and it continues to build brand equity for Nike.

One of the retail companies which I think gets good publicity/public relations is P&G. This company has been able to take its products to grass root levels, even in the poorest of countries through its top of the line distribution system and made healthcare products available to even the poorest strata. The company has understood the market dynamics very well and it tweaks its products according to the market its operating in, for example it understood the differences in price sensitivity and buying patterns in the US and India, accordingly it offers smaller SKU's (shop keeping units) in a price sensitive Indian market, where people prefer repeated buying as opposed larger SKU's in lesser price sensitive US market, where people tend to buy in bulk. Keeping in mind these differences, it sustains a huge product mix and multiple product lines, with products ranging from high end to ultra affordable. P&G has also taken extensive charity work and undertaken countless environmental and CSR initiatives in many countries across the world which has brought in praise for the company worldwide and it enjoys an excellent reputation in the market.


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