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Explain some theory that you have read about in relation to the pricing of products and discuss its usefulness - Essay Example

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Buyers are not always entirely rational and do not usually have ideal information when they purchase products. Consumers are sometimes quite…
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Explain some theory that you have read about in relation to the pricing of products and discuss its usefulness
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Download file to see previous pages In the marketplace, they encounter a wide array of vendors and product offerings with a complex variety of benefits, prices, terms, and promotional messages. Research findings suggest that much of what people do when they buy products and services follows a definite logic. They look for cues to help simplify decision making, and often rely on simple rules of thumb. Correspondingly, it is possible to identify patterns of behavior in the way buyers go about satisfying their needs (Morris, Morris, 1990). The business must consider the customers perception of price implementing strategies such as positioning, price points and fair pricing. Price alone can be used in several ways to attract customers. There are two opposing strategies to the pricing of a product. If the business expects to be the low-cost leader, it must price (position) lower than the competition. If it wants to signal high quality, it should price products higher than most of the competition. Some manufacturers and retailers use price as a signal of quality. Consumers often have few indicators of quality, so price may be perceived as one of the better available cues.  By studied these various psychological aspects of consumer behavior, it becomes possible to price products and services to be of maximum appeal to the target market.
Certain brands and retailers position themselves as providing value and quality at a low cost. These retailers rely on loss leaders to get consumers in the door knowing that once in, consumers are more likely to shop for other things as well. There are certain specific prices (price-points) at which people become more willing to buy a certain type of product. ‘Under £100’ is a popular price point. An amount below £20 including sales tax is another popular price point because it is the most popular denomination of money that people typically carry with them. ...Download file to see next pagesRead More
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