Clifford, Knowing Cost, the Customer Sets the Price.

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I chose the article by S. Clifford, Knowing Cost, the Customer Sets the Price.

  • Discuss the key purpose of the article in relation to the pricing component of the Marketing Mix. 

The articled is about J.C. Penney, and several other stores and how they are handling their prices to bring in more customers. Lamb (2013) tells us that “Price is an important competitive weapon and is very important to the organization because price multiplied by the number of units sold equals total revenue for the firm” (p. 28). Back in 2012, J.C. Penney instituted a new pricing system. Clifford (2012) writes, “J. C. Penney has introduced a streamlined system: daily prices, lower monthlong specials and clearance prices” (para. 7). A retailer needs to be competitive in price to maintain a customer base, so if they are not getting the customers, they need to make some changes.

  • Identify two pricing concepts that you learned from reading this article. 

Lamb (2013) states that, “Consumers are interested in obtaining a “reasonable price.” “Reasonable price” really means “perceived reasonable value” at the time of the transaction” (p. 326). Customers have an idea about what something should cost, but they do not truly know the real price of a product. When a company lowers, or discounts the price of an item, the consumer will compare the sale to the retail price, but if it is marketed right, the pitch of the discount will sell the item to the customer, and they will see that this is a more reasonable price.

The other concept that Lamb (2013) discusses is, “To survive in today’s highly competitive marketplace, companies need pricing objectives that are specific, attainable, and measurable” (p. 326). Most retailers cannot just expect to charge high prices for their goods today. The consumer is more knowledgeable about competition and where they can find a better price. In order to stay in the game, you have to compete and competing means have a good product at a fair price that the consumer wants.

  • From the perspective of a professional, what impact does the information on pricing in this article have on the marketplace?

From reading the article, which contained some feedback from customers, the changes made confused customers who were used to the older way of pricing at the retailer. The J.C. Penney chief executive, Ron Johnson, explains that the customers know when they are being charged a fair price for an item and that charger higher prices did not make them spend more money in the store. Typically, when one store lowers its prices, other retailers will attempt to follow suit to keep sales in their store, especially if the change in pricing seems to be having an effect in sales with both retailers.

  • From the perspective of a consumer, what impact might the pricing concepts in the article have on the buying decisions of consumers? 

From what I read in the article, this new pricing concept has consumers confused, at first. But I think that once they come to understand how it works, consumers will take advantage of the sales. Clifford (2012) stated that it is set up like this, “The store has cut prices by about 40 percent versus before the change, and rounded prices to the nearest dollar ($12, say, versus $11.95 or $11.99). After that first tier of regular prices are specials, which last a month rather than a day or a few hours. And Tier 3 is clearance items, which go on sale the first and third Friday of every month, in tandem with many paycheck cycles” (para. 15). It is a little on the confusing side, but any true shopper, especially bargain hunter, will pick up on the schedule and go with it.

  • How might this information on pricing affect you personally? 

I personally used to be a devote J.C. Penney shopper back in the 90’s, but I eventually steered away from them because of the very high prices. When stores like Ross and Burlington opened up in my area, I found similar products at reduced prices, why pay more when you do not have too. And honestly, I haven’t shopped there in years and even this price change would not get me back there.



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