Variation in Pricing of an Identical Item - Assignment Example

Marketing Assignment OVERVIEW Pricing is recognized to be a procedure of ascertaining what an organization will be getting by charging a consumer in lieu of an offered product. The price that prevails in the market for a specific time for a specific good or service is termed market price. Pricing is one of the elementary factors in financial modeling and one of the P of the 4Ps of the marketing mix. Price is the only element in 4P that is associated with revenue generation. The requirement of a consumer can be transformed into demand only if the consumer develops keenness and interest to buy a particular product.

Thus, pricing plays a central role in marketing. Grocery retailers are becoming the dominant player in the food chain in the United States (US) and in a number of other nations. Most likely the question is not whether retailers have the ability to influence to increase prices, but rather the extent and the implication of that influence. Retailers adjust their pricing in response to the demand of the market along with cost factors. With these considerations, the paper intends to determine the influence of pricing by different grocery retailers on consumers.

WIDE VARIATION IN PRICING OF AN IDENTICAL ITEM The large chain store, the local chain store and the convenience store are different in size, concept, and place. The large chain stores have branches all over the world and usually are situated near the chief market or posh areas, e.g. Wal-Mart (Wal-Mart Stores, Inc. “Wal-Mart”). Wal-Mart always follows aggressive policies to fit in the low cost. Other large chain stores such as Albertsons, Kroger, and Kmart Super Centre among others always follow low-price strategies to attract a huge mass of consumers.

On the other hand, local chain stores have their branches situated over the local regions and can be found in both urban as well as rural areas. They allocate less space for packaged products and more space for fresh produce meat, seafood, and chef-produced items. They normally charge a little higher or the same prices in comparison with large chain stores. Finally, the convenience store is a type of store that stocks a range of everyday merchandise and may be positioned alongside a busy road, in an urban area, near a railroad or railway station, or in another transport hub.

This kind of store remains open for 24 hours as the name suggests. Convenience stores generally charge high prices for a product. If meat is taken as a product then the convenience store will charge the highest price than the other two. Contrarily, the large chain store will charge the lowest probable price. The price charged by the local chain store will lie somewhere in between the large chain store and the convenience store (Wal-Mart Stores, Inc. “Wal-Mart”). THE FACTORS THAT LEAD TO THE VARIATIONS IN PRICES The factors on which pricing mainly rests include market condition, transportation, demand and supply of merchandise, marketplace, and competition.

A company’s pricing factors are affected by both internal and external factors. Odd-Even Pricing. The price set to change consumers' insight is known as odd-even pricing. Like, keeping the price to US$19.9 instead of US$20 makes it appear in front of the customers that the price lies in the ‘nineteen range’ rather than in the ‘twenty range’ (Pearson Prentice Hall, Inc. “Factors To Consider When Setting Prices”). Promotional Pricing. The process of setting low prices temporally, to boost efficiency in sales is promotional pricing.

This technique is used during the launching of a product to attract a large section of consumers (Pearson Prentice Hall, Inc. “Factors To Consider When Setting Prices”). Prestige Or Image Pricing. It is the strategy of marketing where prices are set high than normal because lower prices will hurt sales instead of helping. For example, in the case of quality perfumes, jewelry, and diamonds such strategies are followed (Pearson Prentice Hall, Inc. “Factors To Consider When Setting Prices”).

Marketing Mix. Pricing decisions must be synchronized with product distribution, product promotion, and product design. The decision related to other variables of the marketing mix may also affect pricing decisions. Quality. Pricing should be based on the quality of the product. Consumers will visit a store with no result if the quality of the merchandise does not match the price (Pearson Prentice Hall, Inc. “Factors to Consider When Setting Prices”). The Market and Demand. The higher the price, the lesser will be the demand, and vice versa.

In the case of prestigious goods, the connection between demand and price is directly proportional. According to the customers, a higher price signifies better quality (Pearson Prentice Hall, Inc. “Factors to Consider When Setting Prices”). Competitors' Cost Price And Offers. Another factor that decides pricing is competitors' cost, price, and offers. For instance, a consumer who assumes to buy a Canon camera will estimate the cost of Nikon, Pentax, and other companies’ pricing strategies which may affect the kind of competition it experiences (Pearson Prentice Hall, Inc.

“Factors To Consider When Setting Prices”). IS IT WORTHWHILE FOR CONSUMERS TO COMPARE PRICES WHEN THEY SHOP? The disparity in prices is a common affair in today’s market scenario. The consumer has mainly two ways of evaluating the fairness of the price. They compare with what they had paid in the past for the same product or they ask other customers what they are paying for the same product. Comparing prices when a consumer shop, completely depend on the consumer’s perception and will. The market is heterogeneous.

The difference in tastes and preferences always exists in the market. Certain consumers consider high prices as a remark of the best quality, so they do not mind paying more i.e. normally higher class people. While certain others consider low prices as their first preference, which include principally middle and lower-class consumers. Nevertheless, when it comes to the same product then it is worthwhile to compare prices because no one will want to pay more when the same product is obtainable in some other store at a much lower price.