Developments and further issues in pricing concepts and practice - Marketing Management

It is tempting to think that pricing is one of the less dynamic areas of the marketing mix. One might think, pricing is either cost-based, demand-based or competitor-based and considerations in pricing decisions are in many ways just the same as they were decades ago. In fact pricing is just as dynamic as any of the other elements of the marketing mix.

Below is a brief summary of some the more important developments affecting pricing:

The Internet and pricing

As with all areas of the marketing mix the Internet is affecting how marketers approach pricing. One facet of this is the increased ability of customers to compare and contrast prices. The Internet moves us close to the notion of ‘perfect information’ on prices central to the economist’s notion of perfect competition. Markets may still not be perfectly competitive with respect to price, but it is much more difficult now for the marketer to avoid extensive price comparisons. As we saw earlier in the chapter, the Internet through direct distribution allows the brand marketer to potentially regain some control over pricing decisions. Yan15 shows that for the marketer who sells through a mixture of online and traditional retail channels there can be real issues of integration and control in price setting.

Increased legislation and regulation

In many countries marketing’s power to set and control prices to consumers has been substantially reduced. We have already discussed this in the context of the growing power of the retailer to set prices. In addition, in many markets there is substantial legislation and regulations relating to price setting. For example, in many countries the price of pharmaceutical products is regulated and controlled. Similarly, through ‘quangos’ and consumer protection bodies, prices of many essential products and services such as gas, electricity, water and public transport are controlled. Finally, and overarching all this, is increased regulation pertaining to pricing in and between trading blocks such as the EC. For example, changes in legislation and the atmosphere concerning competition have meant that European car distributors and franchisees now have almost limitless freedom over the prices charged for cars they sell on behalf of the major car companies.

The Single European Currency

Staying with developments in the EU, one of the most significant developments affecting marketing pricing strategies in Europe is the single Euro currency. At the moment only Denmark and the UK have opted out, and some newer European Union countries will join when they fulfil the right conditions to join the single currency. There are arguments both for and against joining, but undoubtedly the single currency is a major factor in setting prices.

Price comparisons and negotiating

Modern consumers are more motivated and sophisticated in their desire to compare and contrast prices to obtain best value for money and shop around to get the best deal. Bargaining and negotiation is now commonplace in the UK even at the retail level. Moreover, as we have noted, developments in communication and IT are facilitating the ease with which customers can compare and contrast prices all made possible through the Internet.

Methods of payment

Finally in our brief overview of developments in pricing, marketers have increased their efforts looking for new ways to make it easier for customers to buy and make payment. Recent years have witnessed a plethora of financing and payment schemes for purchasing expensive consumer durables. Cars, jewellery, holidays and homes can be purchased using a myriad of payment methods like leasing, leasing and buyback schemes, tracker mortgages and timeshare all of which all examples of strategies designed to make it less ‘painful’ for customers when it comes to paying. These help to justify the contention that pricing is perhaps one of the most dynamic elements of the marketing mix.

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