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BUSI 520
Chapter Sixteen: Developing Pricing Strategies and Programs
Understanding Pricing
Throughout most of history, prices were set by negotiating between buyers and sellers
Setting one price for all buyers is a relatively modern idea that arose with the
development of large-scale retailing at the end of the nineteenth century
Pricing In A Digital Age
Traditionally, price has operated as a major determinant of buyer choice
o Consumers and purchasing agents who have access to price information and price
discounters put pressure on retailers to lower their prices
o Retailers in turn put pressure on manufacturers to lower their prices
o The result can be a marketplace characterized by heavy discounting and sales
promotions
The Internet has changed the way buyers and sellers interact
o Buyers can:
Get instant price comparisons from thousands of vendors
Check prices at the point of purchase
Name their price and have it met
Get products free
o Sellers can:
Monitor customer behavior and tailor offers to individuals
Give certain customers access to special prices
o Both buyers and sellers can:
Negotiate prices in online auctions and exchanges or even in person
A Changing Price Environment
Pricing practices have changed due to:
o The recession in 2008-2009
o A slow recovery
o Rapid technological advances
Some say new behaviors are create a sharing economy in which consumers hsare bikes,
cars, clothes, couches, apartments, tools, and skills and extracting more value from what
they already own
Trust and a good reputation are crucial in any exchange, but imperative in a sharing
economy
o Most platforms that are part of a sharing-related business have some form of self-
policing mechanism such as public profiles and community rating systems
Bartering
o Bartering, one of the oldest ways of acquiring goods, is making a comeback
through transactions estimated to total $12 billion annually in the United States
o Experts advise using barter only for goods and services that someone would be
willing to pay for anyway