Key Proc 5830 Pricing Essay

1064 words - 5 pages

1. You are considering purchasing a personal computer. What factors would affect your price sensitivity in making the decision? How would those same factors affect the price sensitivity of some personal computer buyers differently?

Some of the factors that affect price sensitivity is brand name, quality of product, features and attributes, warranty and guarantee as well as customer service offered by company, etc. These factors can affect price sensitivity of other buyers in a different manner. For example, brand may not appeal in the same manner to everyone. A brand conscious buyer will be heavily affected by product's brand whereas a buyer who is more focused on technology will be less ...view middle of the document...

They have backed this marketing strategy with quality service to customers.

4. A company can gain a substantial market share advantage with lower prices in a price sensitive market. Why then would any company in such a market choose to price cooperatively?

This is to ensure that a price war does not start in the marketplace, thereby hurting all players and benefitting the customers only in terms of low pricing. Cooperation is necessary to ensure a minimum profit margin for all players.

5. The gasoline service stations in Rochester, New York convinced the City Council to ban signs displaying gasoline prices. Why would they want to do this? What effect do you think this law had on gasoline prices? Why?

They would want to do this to ensure that customers do not visit the cheapest stations only and there is equal opportunity for everyone to compete, as well as ensure that customers atleast drive to the station and give them an opportunity to sell the fuel. I think this law will result in competitive pricing for the consumers because fuel stations will not let customers go once they have visited the station by lowering their prices as compared to nearby competitors. On the other hand, once customers have visited a station, they might also be forced to purchase a higher priced fuel because they do not want to make the effort of visiting another station.

6. Despite the fact that rental rates for commercial space and labor costs are generally higher in big cities than small towns; the prices of many products â€" such as electronics and clothing â€" are higher in small towns than in large cities. Can you explain this?

This is due to the fact that companies charge a premium for transporting these products to smaller towns where company's warehouses are not present. Further, in larger cities, there is higher sales which results in economies of scale and more competition, due to which pricing is made competitive.

7. At what point should a company �"walk away from the business?” Should a company always strive to win every bid and avoid losing business?

A company should walk away from business if it is a loss making proposition, or does not yield any strategic benefit even on a no...

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