Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Pricing Objectives and
Policies
Text © The McGraw−Hill
Companies, 2002506 Chapter 17
Do these various strategies promote prices that are above or below the market—
or are they really different prices for different target markets or different marketing
mixes? In making price decisions and using value pricing, it is important to clearly
define the relevant target marketand competitorswhen making price comparisons.
Consider Wal-Mart prices again from this view. Wal-Mart may have lower cam-
era prices than conventional camera retailers, but it offers less help in the store, less
selection, and it won’t take old cameras in trade. Wal-Mart may be appealing to
budget-oriented shoppers who compare prices and value among different mass-
merchandisers. But a specialty camera store may be trying to appeal to different cus-
tomers and not even be a direct competitor! Thus, it may be better to think of
Wal-Mart’s price as part of a different marketing mix for a different target market—
not as a below-the-market price.
A camera producer with this point of view might develop different strategies for
the Wal-Mart channel and the specialty store channel. In particular, the producer
might offer the specialty store one or more models that are not available to Wal-
Mart—to ensure that customers don’t view the two stores as direct competitors with
price the only difference.
Further, the specialty store needs to communicate clearly to its target market how
it offers superior value. Wal-Mart is certainly going to communicate that it offers a
discount from some list price. If that’s all customers hear, it’s no wonder that they
just focus on price. The specialty retailer has to be certain that consumers under-
stand that price is not the only thing of value that is different. This same logic
applies to comparisons between Internet sellers and brick-and-mortar competitors.
Each may have advantages or disadvantages that relate to value.In a mature market there is downward pressure on both prices and profit mar-
gins. Moreover, differentiating the value a firm offers may not be easy when
competitors can quickly copy new ideas. Extending our camera example, if our
speciality store is in a city with a number of similar stores with the same product,
there may not be a way to convince consumers that one beats all of the others. In
such circumstances there may be no real pricing choice other than to “meet the
competition.” With profit margins already thin, they would quickly disappear or turnMeeting competitors’
prices may be
necessary
Value pricers define the
target market and the
competition
Epeda sells high-quality
mattresses. It wants customers
to know that its higher price is
worth it. This ad says, “Lots of
mattresses are cheap to buy. The
reason is to make you forget
how much sleeping on them is
going to cost you.”