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Price penetration is most appropriate in these circumstances: Product demand is highly price elastic. Substantial economies of scale are available. The product is suitable for a mass market, with enough demand. The product will face stiff competition soon after introduction. There is not enough demand amongst consumers to make price skimming work.
Discounts can occur anywhere in the distribution channel, modifying either the manufacturer's list price (determined by the manufacturer and often printed on the package), the retail price (set by the retailer and often attached to the product with a sticker), or a quoted price specific to a potential buyer, often given in written form.
A business will then need to consider which channel is more cost-effective and productive in terms of timely delivery, efficiency, pricing policy, and where it stands among competitors; for example, overall feedback, higher rating, and higher demand from customers.
Before designing a distribution system, the supplier needs to determine what distribution channel to achieve in broad terms. The approach to distributing products or services depends on a number of factors including the type of product, especially perishability; the market served; the geographic scope of operations and the firm's overall mission and vision.
For a business to come up with a decision using the grid, key personnel must consider numerous factors such as market penetration, product development, market development, and diversification, which measure brand popularity, defined as the number of people who buy a specific brand or a category of goods at least once in a given period, divided ...
For example, if the price of a product is $93 and the sales price is $79, people will initially compare the left digits first (9 and 7) and notice the two digit difference. [6] However, because of this habitual behavior, "consumers may perceive the ($14) difference between $93 and $79 as greater than the ($14) difference between $89 and $75". [ 6 ]
When a business specifically cuts prices in order to make a sale, the customer can sense that the original price must be inflated if the business is so quick to slash the price. As a result, the customer may lose respect for the business and realize the prices are too high to begin with. Good customer service must show value to the customers.
Sellers competing for price-sensitive consumers, will fix their product price to be odd. A good example of this can be noticed in most supermarkets where instead of pricing milk at £5, it would be written as £4.99. Contrarily, sellers competing for consumers with low price sensitivity, will fix their product price to be even.