BUS4098 Week 3

Marketing Decisions - Pricing

In Week 2, you learned about price signaling. You noted that many customers use price signals as a

substitute for detailed information about a product. More than any other element in your marketing

strategy, the price indicates the segment of the market in which you would like to position yourself. It does

not necessarily indicate anything more. Your �rm's styling and quality decisions, for example, do not have to be in perfect alignment. You can set a premium price with an average quality shoe, provided you are able to

sustain an image of quality or imbue your shoes with other traits that will make customers ignore the less-

than-average quality. Understanding the traits of this powerful variable—price—is a key to its effective use.

On one hand, think about the signal you get from the marketplace about a �rm, which moves its prices up and

down all the time. You see this in a few industries, such as airlines, but for the most part, �rms try to hold

price steady to send a clear signal to the market about their products' position and to keep customers from deferring purchases until items go on sale.  On the other hand, the ease of price changes provides �rms with

the ability to keep supply and demand in alignment at the �rm level.

In Week 1 and Week 2 lectures, we looked at the in�exible nature of manufacturing plans and celebrity

contracts. Firms that feel the need to sustain volume, so that these less �exible and expensive assets are best

utilized, �nd the contrasting �exibility of price quite tempting. Clearly, this is what the airlines do in order to

utilize their planes optimally. However, it is not something that �rms prefer to do.

Additional Materials

Marketing Decisions-Pricing 

(media/week3/SUO_BUS4098%20Supplemental%20PDF%20for%20W3%20L2%20Marketing%20Decisions-

Pricing.pdf?_&d2lSessionVal=4ziczn9qEskPZ3ZWUncGyhO8u&ou=91506)

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