General Principal and relevant Concepts
Discuss About The Market Performance And Price Level Under Different?
The price of different product is one of the important parameter which decides upon the supply and demand rate in the market. It is often believed that in slow Economic growth circumstances, it is often effective to lower the level of pricing of consumer products. Lower level of pricing will thereby help to increase the total amount of sales and hence, more profit can be earned. However, according to many expert economists, the pricing strategy of a product should be done according to the level of demand. If the prices of the products are raised too high by the sellers, where the demand of a product is less than they can offer it will end up having surplus products. The sellers, will then have to sell those products act much lower rate until and unless the stock is over. On the other hand is the prices of the products are set too low, and then it will be possible to sell the entire stock before the demand is being fulfilled. This will ultimately lead to a shortage of consumer products with in the market. Moreover it will lead to more loss for the sellers.
With increased level of prices, the total number of suppliers for a product also increases due to the fact that they are able to make better amount of profit. The demand of a product also increases due to lowering price level. In the given context, the current report will discuss about the effects of pricing drop that are done in business with the intention of improving the profit level. The effects of price drops will be discussed by comparing the same across different industries.
According to the work of Ingenbleek et al. (2013), the prices of product are generally being decided with the approach of choice between market penetrating price and market skimming. Research paper also highlighted about various complexities that are involved in the consumer market about deciding the level of prices during the time of product entry. It is important for the marketing manager to use different parameters in order to compare the pricing of a product that has been introduced in the market. This comparison is being made with similar kinds of products, which are already present in the market. The high level of complexity that is involved in deciding upon the pricing of a product is due to the fact that if prices are too high, then a company might lose majority of the potential customers. Hence, according to Ingenbleek et al. (2013), during the time, when a new product is being introduced in the market, the prices are generally kept at lower level. The negative impact of this decision making process is due to the fact that it can compromise upon the immediate profit potential that a company could have made. With high level of profit, it can also be possible for the company to improve upon the features and quality that are being offered within a particular product. Another negative aspect of this strategy is due to the fact that most of the Potential customers might lose trust over the product due to the fact that most of the customers have a belief that is not possible to get good quality product at lower level of pricing. Hence, the reputation of the product is at stake in long term process. Alghalith, et al. (2014), have suggested that new pricing techniques will be implemented that can help in the process of deciding the product pricing.
Application of price drops in retail/grocery and electronic industry
Hence, it is evident that Product pricing strategy is an important criterion, which decides upon its market performance. The pricing of a product should be decided upon its current market value and demand among the consumers. The level of competition or cost informed pricing strategy along with value informed pricing strategy is being used in the current techniques. Thereby it can be said that lowering the level of prices may not be an effective technique as the cost of the product will always depend upon current market demand among the potential customers
The research paper of Tappata (2006), has discussed the effects of the poor level of information that are being provided to the customers while deciding upon the pricing of a product. It is important for the business organisations to provide the correct information about the factors, which decides upon the price of a product. The customers often face price dispersion due to the fact that the same product can have different level of pricing across different stores or brands. The research paper of Tappata (2006), highlighted about the term called Consumer search price, which is the cost the customers have to bear, while they shift from one brand to other in the intention of getting the product at much lower rate. It has been seen that in many markets the price of consumer product rises at much greater rate than it falls, which is at much lower rates. This can be one of the major reasons for lower level of competitive advantage among many business firms. Hence it is evident from the fact that the companies should have the potential to fluctuate their pricing of product depending upon the current market demand. As the companies are able to fluctuate the pricing depending upon the customer's demand, it is possible for them reduce the cost of the search price that are spent by the customers.
According to Wu et al. (2016), the business forms selling basic consumer products like grocery or retail items need to have effective pricing strategies depending upon the situation of the market. Fluctuations in the pricing of basic consumer product can have significant effect on the profit level of a company. However, Berg et al. (2015), argued about the fact that companies do not have to face high level of challenge while deciding upon the price of retail and basic grocery products due to the fact that the demand of these products are always high. This therefore provider company the opportunity to impose high level of pricing. There are very minor changes among the customer with the fluctuation in the pricing of basic grocery products. The demand of the grocery product is always high among the consumer market and is irrelevant of the level of supply within the market.
Effect of Price Drops among customers and business man
Carranza et al. (2015), have mentioned about the fact that retail and grocery manufactures rely upon the price promotion strategies that is one of the effective ways to increase the level of sales in the market. This can have serious effects on the overall revenues that are being made by the companies. From the research work of Modak et al. (2015), it is clear about the fact that lower pricing strategies can have little level of long term effect on the overall volume of sales. The revenue and the profit margin also can quickly get back to the baseline. On the other hand, the effects on the short term scale can be both positive and negative, which depends upon the situations.
The effects of the price drops within the electronic industrial products are quite different from that of the retail or grocery products. The most relevant and basic differences between this industry is due to the fact that the demand of the electronic products are quite low compared to that of the retail or grocery products. Hence, unlike the customer’s products in the retail industry, the manufactures in the electronic products do not have the opportunity to higher the prices of the products. Moreover, due to the fact that there is more number of electronic suppliers in the market than the rate of actual demand, the surge in the price can thereby have the effect of lowering the sales volume (Kassakian and Jahns 2013).
Mao et al. (2017), have mentioned about the fact that the buying decisions that are made by the customers are dependent on the level of pricing. It is also relevant to mention in the context that the effects of the price drops can vary among different types of groups. This mainly depends upon the fact that many customers do not have faith over the quality of the products, when the prices of the products are lowered. On the other hand, the companies can make more profit from certain group of customers. From the point of view of the business owners, it is essential from them to decide upon the policy of price drops depending upon the buying behaviour or the psychology of the target groups of customers.
On the conclusion note, it can be said that the effects of price drop can vary within the consumer’s market depending upon the level of demand of particular products. It is the duty of the marketing managers to analyze the level of the demand market and the volume of the supply chain. The effects of the price drop in the consumer market can vary depending upon the types of industry and the type or buying behaviour of target customer’s groups.
Alghalith, M., Floros, C. and Poufinas, T., 2014. Simplified option pricing techniques (No. 11-2014). Democritus University of Thrace, Department of Economics.
Berg, M., Hartley, B. and Richters, O., 2015. A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions. New journal of physics, 17(1), p.015011.
Carranza, J.E., Clark, R. and Houde, J.F., 2015. Price controls and market structure: Evidence from gasoline retail markets. The Journal of Industrial Economics, 63(1), pp.152-198.
Ingenbleek, P., Frambach, R.T. and Verhallen, T.M., 2013. Best practices for new product pricing: impact on market performance and price level under different conditions. Journal of Product Innovation Management, 30(3), pp.560-573.
Kassakian, J.G. and Jahns, T.M., 2013. Evolving and emerging applications of power electronics in systems. IEEE Journal of Emerging and Selected Topics in Power Electronics, 1(2), pp.47-58.
Mao, T., Lau, W.H., Shum, C., Chung, H.S.H., Tsang, K.F. and Tse, N.C.F., 2017. A Regulation Policy of EV Discharging Price for Demand Scheduling. IEEE Transactions on Power Systems.
Modak, N.M., Panda, S. and Sana, S.S., 2016. Pricing policy and coordination for a distribution channel with manufacturer suggested retail price. International Journal of Systems Science: Operations & Logistics, 3(2), pp.92-101.
Tappata, M., 2006. Consumer Search, Price Dispersion, and Asymmetric Pricing (Doctoral dissertation, University of California, Los Angeles).
Wu, L., Liu, S. and Yang, Y., 2016. Grey double exponential smoothing model and its application on pig price forecasting in China. Applied Soft Computing, 39, pp.117-123.
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