Blog 9 The Method Behind the Madness: Pricing

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Walking through the stores in the mall you get a mix of emotions looking at the price tags in the different stores. Its a mix of sticker shock and then moments of success when you feel you have found a deal. You can't help but wonder, how does the store and brand determine the cost of their products? How did they manage to figure out how to calculate the number on that sticker? Well for the organization and brand to start determining this, they look at four approaches they can take to figuring out this price level. They can do this by looking at:

    1. Demand        

    2. Cost

    3. Profit

    4. Competition

Looking at demand pricing tactics, this is when a company looks at the numbers and response from consumers. There are a few typed of demand pricing strategies that could be used.

The first is skimming pricing. This is done by setting an initial high price that desiring customers would be willing to pay. This pricing is possible if:

1. There is a demand there tends to be success
2. Enough prospective customers are willing to immediately buy
3. An initial high price that doesn't attract competitors
4. In lowering the price it has minor effect on sales volume
5. Customers interpret high price as high quality

An example of skimming price would be that of new technologies that hit the market. At the time of their immediate release such as the release of a new laptop or television by certain brands, the price is higher due to the updated new technologies it contains. This differs from penetration pricing, which is the setting of an initial low price to appeal to mass markets. This is done if: 

1. Many segments of the market are price sensitive
2.  Setting a lower price damages competitors 
3.  Unit production and marketing costs decrease dramatically due to sales

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In demand oriented approaches, there are factors such as tastes and preferences that customers have which companies and brands keep in mind while setting their pricing strategies. Seen in all these pricing strategies, this also includes prestige pricing, which is when the prices are set at a higher bar. Then there is odd even pricing which is when a certain price is set a few dollars or cents around the set price. An example of this is the $19.99 price instead of $20.00 you may see in stores. In addition there is bundle pricing which is when companies bundle together different products to make them one single price. Examples of this would be some technological bundles like cell phones. One other type of demand pricing, yield management pricing, This is a strategy of changing different prices to maximize revenues, say the different types of tickets you can buy for a flight in an airplane such as economy or first class. 

There are different pricing strategies for cost, profit and competition oriented pricing approaches. Those are applicable to other situations, but for the purposes of this holiday season and the high demand that comes with this time of year, these are some of the pricing strategies that can most likely be seen in the products around you as you walk through the mall this December. 

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Blog 8: Apple Profile

By now the brand "Apple" has been coined as far more than a household name. The famous technology brand has expanded its business globally and can be seen everywhere through different technological advances. Walking around you can easily see people on their iPhone's checking on social media, people running listening to their music through their iPod and studies coffee-shop goers searching the Internet on their Mac computers. Now what make a company such as Apple so successful? Well its simple to say that there are more reasons than one. 

One of the main successes of Apple is their product line. A product line is a collection of products that a company sells. They are not all the same but are made by the same company so they target multiple markets with these different products. The main Apple products include: 

The iPhone:

iPhone 6

iPhone 5

iPhone 5C

The iPhone has come a long way since its creation. These models above are some of the latest iPhones which are updates from the older 4 and 4S. There is also an iPhone 6 plus which is much larger in size and is the newest version of the phone. Consumers can access the Internet, phone, video chatting, social media, endless apps and music on their IPhone. iPhones constantly come out with updates and new models are released in incremented time. 

The iPod: 

iPod Touch

iPod Nano

iPod Shuffle

The iPod remains a popular product and all of these models are upgrades from the older models of music player. The Touch being similar to an iPhone, the shuffle mainly just picking your songs at random and the Nano a little in between the two, similarly to the iPhone all of these technologies plug into your computer where you can download music and apps from you iTunes Library.                                                 

Computer/Tablet:

Mac Computer, MacBook Laptop and MacBook Air

iPad mini and iPad

These are the computers to the Apple brand, both handheld and desktop computers that cater to different consumer needs. This includes the tablets to the left and then the computers to the right which can be targeted at many consumer markets such as students, families, business workers and many others. 

A interesting point about the Apple brand is that they not only have a single product line of their phones, music players, tablets and computers but they have product lines within their product lines. This is how they are able to customize their product to the consumer based on the different products and options they have available on the market. What you can also see is how sometimes they make their products particularly their computers built-to order, which is a type of manufacturing where you create a product only when there is an order from a customer. You may see a MacBook in a store but you do not end up buying that exact one in the store, you order it and it is delivered at a later date with aspects that fit your needs. 

In addition, with all the Apple products there are complimentary accessories that come with it such as particular chargers and headphones. These products come from a derived demand which is when the sales of a product frequently result (or are derived) from the sale of consumer products. Usually this refers to business products but in this case the accessory products are needed in order to allow the technology to work and function properly. Overall the demand and appeal of the Apple products prove to attribute to the company's success. Apple is a brand and company that even though has created so much, still has much in the works. 

For a sneak peak at their latest creation, check out the Apple Watch which is due to be released in 2015: Click Here

All images via www.apple.com

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Blog 7: Deals, for You or for Them?

Its Christmas time and you want to hit the mall for the best products and deals to get all the gifts you need to put under the tree. You walk through stores such as Macy's, Famous Footwear, American Eagle and Bath & Body Works to get everyone in your family what they wanted on their wishlist. The deals are to the ceiling, Two for One! Buy one get one 50% off! 30% off when you buy Two or more! Buy Two get One FREE! There is not one thing about those discount signs that isn't attracting to the consumer eye. Why do you think Black Friday has basically become its own holiday in the United States? Consumers love deals. Consumers love getting good products at a good price. So how do companies create these deals while also being able to benefit from them themselves? Of course, its all one big plan.

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It all starts with pricing. Pricing is the money or considerations (including other products and services) exchanged for the ownership or use of a product or service. Pricing is a very important component in the process of a company putting a product out on the market. It impacts all the financials of the company as well as the overall profit it will have. With this in consideration, why would a company want to have sales? Well sales draw in the consumer. To see that they can get the products they want at a deal rather than paying the regular set price is something that could win them over. There are a few ways that sales still draw the consumer in, but remain mainly benefiting the company's sales. These include:

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Flash Sales - These are sales on items that cut the price for only a few hours, leaving consumers to make a decision on the spot and not enough allotted time to calculate the math.

Shortcuts - By having these sales, especially those say on Black Friday where those sales are a one time deal, many consumers feel they can do shortcut math to see if the deals are worth it. Sometimes that works but for the most part those calculations are a bit more complicated than that and are planned out by the company who put them up. 

Discounts on Discounts - They are far less fair than they appear. Discounts on top of one another may look like a huge save but sometimes might not exactly equal to add up as much as the consumer thinks. This is because each following discount is taken off at a lower price base.

What They Don't Necessarily Need - Offering "good deals" on items that a consumer might want, but might not necessarily need would feed into their want to buy the product. By having these deals it opens up what the consumer thinks is an opportunity for a bargain on something they want, but don't really need over other things. 

In stores such as Macy's and Famous Footwear, multiple brands are showcased within the store and certain sales tactics can draw in those consumers who have loyalty to those brands in the store. This goes for stores like American Eagle also who have a popular target market and cater their sales to the needs of that target market that is loyal to their brands. All of this is interesting to look at because at the end of the day, no matter what the price, it is all strategically planned to go back to what will be profitable for the company. 

Blog 6: Crocs and Fads in the Product Life Cycle

During the fad which launched in 2006, did you ever own a pair of Crocs? These fad fashion shoes hit the market with some doubts and low hopes. To many’s surprise the shoe company was able to profit sales and grow through the following year by reaching a peak at $847 million in 2007. Now a fad product is a bit different than a fashion product. A fashion product is one that is ever changing is goes with the style of the time. An example of this would be jeans and the different styles they have taken over time. A fad product is one that has a shorter product life cycle that that of a fashion product and is popular for a specific amount of time. Crocs are a perfect example of a fad product. For a little synopsis on the company, Crocs is:  

"Crocs offers several distinct shoe collections with more than 300 four-season footwear styles. All Crocs shoes feature "Croslite" material a proprietary, revolutionary technology that gives each pair of shoes the soft, comfortable, lightweight and odor-resistant qualities that Crocs fans know and love. Since 2002, Crocs has sold more than 200 million pairs of shoes in more than 90 countries around the world. " - (via)

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A company that had popularity in the mid 2000's, Crocs have dwindled down in the market and are looking to re brand their product since their own famous rubber shoes have gone through the product life cycle. You are probably wondering what the product life cycle is, and this post is here to explain that. The product life cycle consists of the stages a new product goes through in the marketplace. There are four steps to this process:

1. Introduction: For Crocs, the introduction of their infamous rubber clog-type shoes was prior to and during 2006. Without any products too similar to it, Crocs came onto the market as it own against some speculation that the company would not be successful. During this stage also puts the product out there and usually creates competition through actions such as implementing a skimming strategy. This is when a company goes about setting a high price to cover the cost of making the product. 

2. Growth: From 2006 to 2007, the growth period of the shoe was at a high peak, the "fad" element of the product was more than prominent. There are some components to the growth stage which Crocs hit when they first came out. Their sales grew rapidly as you could see through the profit, and this resulted in more competitors including knock-off Crocs. There were also little widgets you could design your Crocs with which was popular for their child market. 

1. Rapid Sales Growth

2. More Competitors

3. Repeat Purchasers

4. New Features

5. Broad Distribution

3. Maturity: This stage followed not too far after the growth stage for Crocs because their fad lasted only so long. This stage is where profits start to decline and sales slow. The shoes have been popular and began to prove their were more of a fad product as opposed to a fashion product with a longer life cycle.

4. Decline: The decline of a product in the product life cycle consists of sales dropping and environmental change occurring such as society's changing favors and likes of products. Fad product have a quicker time frame which is what happened to Crocs. 

Even though a fad product and having a shorter product life cycle, Crocs is still innovating and refashioning their product to try and satisfy new markets. Looking on their site you can see all the different products they have developed. They also have Crocs Cares. This is the platform of the company’s overall Corporate Social Responsibility program which provides shoes to families and children around the world. Their mission is to: 

"...promote health and education by providing happy and healthy feet around the world."

With this program and its new innovations, you can see that Crocs is a respectful and quality company that is trying to keep their name on the market and cater their company to the needs of the masses. Their aim of transitioning from having a fad product to creating a fashion product is still in the works with much to come. In researching this topic I found a interesting article on the company's success published on Entrepreneur.com which made for an interesting read! Check out Crocs: Footwear Fad to a Billion Dollar Company