Marketing Management: Price - Implementation - PDF

Marketing Management  2 Recap: Implementation: The marketing mix and its instruments - Product Customer value is derived from three different levels of the “product”: (1) core customer value, (2) actual produc...

Marketing Management  2 Recap: Implementation: The marketing mix and its instruments - Product Customer value is derived from three different levels of the “product”: (1) core customer value, (2) actual product, (3) augmented product. Product decisions about quality, features, packaging, style and design, branding and support service need to be made. Brands influence the customer through a rational and emotional component and help to differentiate a firm’s offering. Managing a “product” over time comes along with important tasks such as new product and brand architecture development. Digitalization changed product innovation and other processes a lot. Potential ethical issues with regards to “product” are widespread. Week 9: Marketing mix: Price  4 Week 9: Roadmap Managing “price” over What does “price” mean? “Price” in a digital world time 1 3 4 2 5 Price decisions Ethical “price” issues  What does “price” mean? 1 "Price" takes a particular role in the marketing mix as price changes have an immediate business impact. However, price management has its own set of challenges.  6 What does “price” mean? o A definition of price and its importance o Challenges of price management  7 A definition of price and its importance  8 What is “price”? A definition and its broader importance o The price is the number of monetary units which a buyer must hand over for one unit of a product. o Beyond a firm’s own interest, many stakeholders study pricing actions: o Among others, managers rely on scholarly research for guidance: «Price» is a research subject in many disciplines such as macroeconomic price theory, microeconomics, marketing science, behavioral economics, and even brain research. o Legal regulations setting boundaries on pricing options: Price Reference: , p.5, 16f. management is subject to a multitude of legal regulations designed to keep businesses from restraining competition or abusing their pricing power.  9 “Price” stands out in the marketing mix for several reasons (1/3) o Price is the only marketing instrument which does not require upfront expenditures or investments. o Price has a strong influence on volume and market share. o Price is an instrument known for its fast applicability. o Price is an instrument known for its fast impact as changes manifest quickly on the demand side. o On the flipside, competitors can change just as swiftly their own prices. o Reference: , p. 6ff. There are only three profit drivers: (1) price, (2) volume, and (3) costs. In contrast to limited cost cutting and demand creation options in today’s markets, pricing improvements have more potential.  10 “Price” stands out in the marketing mix for several reasons (2/3) A deep understanding of the relationship between price and demand, enables to leverage this marketing instrument further: Price can not only be a powerful driver of profit but also of growth. This is enabled e.g., by non- Reference:. linear systems. https://www.youtube.com/watch?v=aNnQcQ2P3SY  11 “Price” stands out in the marketing mix for several reasons The example of (3/3) Apple illustrates the impact of pricing of profits: iPhone is only 14% of global smartphone volume share, and 42% of revenue share, but it's 80% of profit share.  12 Challenges of price management  13 Price management is not an easy task, mainly due to 2 fundamental reasons (1) Complex price-response relationships characterize the real-world impact of pricing (2) Manifold pricing systems provide sheer endless possibilities to optimize pricing Reference: , p. 10ff. ! Besides, as with any other managerial decision making, organizational implementation barrier and industry specifics might stand in the way of an effective price management.  14 (1) Complex price-response relationships characterize the real-world impact of pricing There is the need to consider possible price-response relationships when assuming several competitors, several time periods, or multistage sales. These might look like this: o Price -> Competitors’ price -> Market Share -> Volume -> Revenue -> Profit o Price (current) -> Volume (future) -> Revenue (future) and Profit (future) o Price (current) -> Volume -> Costs (future) -> Profit (future) o Price (manufacturer) -> Price (retailer) -> Volume -> Revenue -> Profit Reference: , p. 11f. ! These examples do not even account for psychological effects such as price thresholds and price anchors and the snob or Veblen effect (associating high quality or prestige with high prices).  15 (2) Manifold pricing systems provide sheer endless possibilities to optimize pricing o Differentiated prices by package size or product variant o Differentiated prices based on customer segment, time of day, location, or phase of the product life cycle o Prices for complementary or substitutive products o Prices for special or additional services o Prices with two or more dimensions (e.g., upfront charge and a usage fee) Reference: , p. 5.  Price decisions 2 While three main pricing strategies can be distinguished (customer- based, cost-based and competitive-based strategies), customers’ perception of the price-value-relationship should be the primary consideration when making pricing decisions.  17 “Price” decisions o A guiding principle for pricing decisions o What are major pricing strategies?  18 A guiding principle for pricing decisions  19 A guiding principle for pricing decisions o The customer's perception is o the decisive factor. Deviations from the consistency band can be perceived as fair or unfair in the eyes of the customer. o Price and value should always be seen relative to each other. So, the price positioning should Reference: , p. 41f. be interpreted from the perspective of the price-value relationship.  20 What are major pricing strategies?  21 3 major pricing strategies and why all are needed (1/2) (1) Cost-based pricing (2) Customer value-based pricing (3) Competition-based pricing Reference: , p. 303ff.  22 3 major pricing strategies and why all are needed (2/2) o Both value-to-customer [#1] and competitors’ prices [#3] define the upper limit for the price, and in practical terms the sharper of the two limits is the one which counts. o A company’s costs [#2] determine the lower limit for the price. ! Reference: , p. 303. Further, the business context matters: Company targets and legal/regulatory constraints can shift the upper and lower limits for price in either direction. For example, if a company sets a minimum margin target, the price margin shifts upwards, while a minimum market share target shifts it downwards.  23 How is the price determined? The price signals the perceived value, and it must cover (internal) costs at the same time to enable a successful pricing strategy. Reference:. https://www.tiktok.com/@y_combinator/video/7195692441729584426?_r=1&_t=8fZ5c6BNGF7  24 (1) Customer-value based pricing: Overview o In this context, a customer’s perceived value is key : Value-based pricing means that the marketer cannot first design a product and marketing program and then set the price. Price is considered along with all other marketing mix variables before the marketing program is set. o It’s important to remember that ‘good value’ is not the same as ‘low price’. For example, some owners consider a luxurious Patek Philippe watch a real bargain, even at prices ranging from CHF 20,000 to CHF Reference: , p. 303ff. 400,000. o The core metric is customer’s willingness to pay.  25 (1) Customer-value based pricing: 2 major types of customer-value based pricing o Good-value pricing means to offer the right combination of quality and good service at a fair price. o This involves introducing less-expensive versions of established brand-name products or new lower-price lines. o It can also mean redesigning existing brands to offer more quality at a given price or the same quality at a lower price. Some firms are even successful by offering less value, but at very low prices. o Or with the daily low-price policy. This means charge a constant, Reference: , p. 306. daily low price with few or no temporary discounts. o Value-added pricing means improving quality/service by adding features to differentiate offers and thus, support higher prices.  26 (2) Cost-based pricing: Overview o For the price decision, the most important aspect of the cost analysis is the clear distinction between fixed and variable costs. Fixed costs do not depend on the volume produced, while variable costs change depending on production volume. o In contrast to the price-response function, the cost function is simpler to determine, because the necessary information comes from within the company. Reference: , p. 87.  27 (2) Cost-based pricing: Key use case (1/2) “” “The cost is not important for establishing the price. It only serves for knowing if you should or shouldn’t fabricate the product”. read more Although not illegal, Dior raised eyebrows when it came to light that a bag that the luxury fashion house sells for 2,780 USD Reference:. only cost 57 USD to manufacture – with workers being paid as little as 2 USD an hour. See for more details. Philip Kotler Textbook author  28 (2) Cost-based pricing: Key use case (2/2) o With the help of cost information, a company can determine a lower bound for the price. Thereby, the lower limit corresponds to the lowest price at which a product would be offered for sale or at which the company would accept an order. o In the long run, the lower price limit is defined by the “fully loaded” unit costs (fixed + variable costs). o In the short run, the lower price limit definition is more complicated. For example, it is often reasonable to only look at the variable unit costs. Reference: , p. 87f.  29 (3) Competition-based pricing: Overview o In many markets, competitors’ prices exert a strong influence on a company’s sales volume. o If competitors feel threatened by price measures, they tend to react, i.e., their reaction elasticity is likewise significant. o A company can implement its own price actions quickly, but competitors can usually respond just as fast. Reference: , p. 90f.  30 (3) Competition-based pricing: Analysis process to derive benchmarks from competition 3 tasks for analyzing competitors pricing actions o Identifying the relevant competitors o Analyzing the current prices of the competitors o Anticipating their potential future price behavior ! The degree of competition and homogeneity of products primarily Reference: , p. 91. shapes the weight a company attaches to such competitive information. For example, strong competition and high homogeneity of products increase the importance of competitive pricing.  Managing “price” over time 3 It is of great importance to understand how customers react to price changes, how this affects the company and how much freedom a company has in setting prices.  32 Managing “price” over time o When to consider price changes? o Understanding the impact of price changes through analyzing price elasticity o The psychology of pricing o Price communication  33 When to consider price changes?  34 When to cut or increase prices? Motives for price cuts: Motives for price increases: o Excess capacity ○ Improve profits o Falling demand in the face ○ Rising costs of strong price competition ○ Manage over-demand in or a weakened economy. case of short supply o Gain market share to dominate the market through lower costs. o Price cuts by competitors Reference: , p. 80.  35 What to expect when increasing or cutting prices? (1/2) o Price repositioning downwards: Good chance of success due to positive response. The originally established position in the upper segments can potentially be threatened and affect profitability if costs are not reduced accordingly. o Price repositioning upwards: Difficult and time intensive. Both changes require a redesign of many functions (R&D, production, quality, design, distribution) to be cost competitive in the lower segments or performance competitive in the Reference: , p. 80. higher segments. ! As an alternative to repositioning an established product or brand, a company could consider creating new brands or acquiring existing brands in the targeted price range.  36 What to expect when increasing or cutting prices? (2/2) However, consumers do not always interpret price changes in a straightforward way. The individual perception of consumers matters. o Consumers may view a price cut in several ways. A price change, especially a drop in price, can adversely affect how consumers view the brand. o A price increase, which would normally lower sales, may have some positive meanings for buyers (see e.g., snob effect). Reference:.  37 What will competitors do? Competitors are most likely to react when (1) the number of firms involved is small, (2) when the product is uniform, (3) when the buyers Reference: , p. 337. are well informed about products and prices.  38 Understanding the impact of price changes through analyzing price elasticity  39 How to understand the price-demand relationship? (1/2) o Understanding the price–demand relationship is key to optimize prices. o A measure of the price demand relationship is price elasticity. o Various price elasticity metrics exist that inform how the own demand changes based on (1) own price changes or (2) competitor’s price changes Reference:.  40 How to understand the price-demand relationship? (1) Own-price elasticity (i.e., impact of own (2/2) prices on one’s own volume) (2) Cross-price elasticity (i.e., impact of competitors’ prices on one’s own volume) https://www.youtube.com/watch?v=z_iv6QBVcHU&t=116s Reference: ,. read more If you can program in Python or want to learn how to do this, check out this free online course which shows to calculate the various price elasticity metrics, see.  41 Interpreting of price elasticity metrics Own-price Cross-price elasticity elasticity Reference: , p. 13, 22f. o Relationship between Wieners and Hamburger: 0.4/0.2 = 2 → Substitutes o Relationship between Wieners and Hot Dog Bread: -0.4/0.2 = -2 → Complements  42 Interpreting of price elasticity metrics (2/2) (1) Own price elasticity: If a price decrease of 10% results in volume increase of 20%, the price elasticity is -2. The negative sign indicates that volume and price changes move in opposite directions. The price elasticity of -2 says that the percentage change in sales volume is twice the percentage change in price. (2) Cross-price elasticity: If the competitor cuts its price by 10% and one’s own volume drops by 5%, the cross-price elasticity is + 0.5. The sign is positive because both changes Reference: , p. 96ff. (the competitor’s price cut and one’s own sales decline) move in the same direction. If both products are complements (e.g., copy machines and cartridges), the cross-price elasticity is negative.  43 When do price changes have a high impact, i.e., when is price elasticity high (1/2) Market, customer and product Market characteristics characteristics are to be o High competitive pressure on the selling considered. Some examples: side o High price transparency o Heavy price pressure from customers Product characteristics (procurement/purchasing) o High similarity and substitutability among o … competing products; little differentiation. o High purchase frequency. Customer characteristics o Mass-market quality, positioning, and o High price awareness Reference: , p. 107f. distribution. o High willingness to accept risk o Frequent use of the product for discounts; o Low importance of image and prestige heavy price advertising. o Low brand loyalty o … o …  44 How do real-world price elasticities across industries look like? o Research findings are Distribution of econometrically estimated price elastics inconclusive as different studies found different price- elasticities for the same sectors. o Price elasticities must be determined on a case-by-case basis. o Example: The compact car Reference: , p. 102ff. segment has relatively elastic demand. The demand depends highly on the price.  45 Static price-elasticity is an oversimplification, some price changes have a stronger impact (1/2) The starting point is the elasticity of your sales to price: By how much % do your sales change if you change your price? The typical answer is -2.5: if you decrease price by 10%, sales go up by 25%. Reference:.  46 Static price-elasticity is an oversimplification, some price changes have a stronger impact (2/2) But this static price-elasticity value only applies to the business-as-usual zone, i.e., close to what the consumer expects to pay for your brand (“reference price”). If you price beyond the “constant elasticity” zone, you will you get higher or lower elasticity after a threshold is reached. 2 examples: Reference: [268, 450].  47 Five methods to determine the price elasticity Various methods are o available to determine the price-quantity ratio, each with its own advantages and disadvantages: (1) expert judgements, (2) direct cust. surveys, (3) indirect cust. surveys, (4) experiments Reference: , p. 137. (5) market observations.  48 The psychology of pricing  49 Not only the objective price, but customers’ perception of the price matters *** Flashback *** The sales volume depends on both the “objective” price and on how the customer perceives the price, what role the price plays for the customer (e.g., as an indicator of prestige or quality), and Reference: , p.131. how and in what context the price is communicated.  50 7 exemplary psychological effects that shape customers price perception Left-digit effect: Ever wondered why prices end in 90 or 99? You can find “99” price tags everywhere, from your bar of chocolate at the supermarket to your monthly gym subscription. Due to what is known as the left-digit effect, customers tend to round to the next lowest monetary unit. A lower number at the start of a price has a huge impact, even though the price is the same. Reference:.  51 7 exemplary psychological effects that shape customers price perception Veblen effect o This effect describes the increasing demand with increasing product prices. o Mainly, consumers buy Veblen goods to achieve a higher (perceived) social status. o Example: The whiskey brand Chivas Regal devised a newer, more attractive label and Reference: ; , p. 145. raised prices by 20%. Thus, the sales volume rose significantly while the product stayed unchanged.  52 7 exemplary psychological effects that shape customers price perception Compromise effect If a very expensive product is added to the product range, the previously most expensive product is sold more, because after adding this new product it appears cheaper in comparison. Transaction utility effect Consumers who are offered a discount are more likely to buy the product, even if the effective price, which is Reference:. to be paid, is the same.  53 7 exemplary psychological effects that shape customers price perception Endowment effect Customers try to avoid losses increases their willingness to pay. Price perception differs depending if one wants to sell or buy. Decoy effect Reference points steer the customer towards a particular decision. “Dummy options” of lesser value convince the customer to choose the more expensive option. Value effect Explicit reminders, such as visuals and other cognitive support, Reference:. help to steer customers towards a specific value perception of a product (e.g., drink in exclusive hotel).  54 5 further psychological effects that shape customers price perception o Ego pricing o Comma effect o Relative size effect o Consolidated surcharges o Descending order effect Reference:. https://www.youtube.com/watch?v=c_yOcEXqnZs  55 Price communication  56 Price communication matters: An overview on selected topics o Classic versus innovative price communication o What to do when the there are price changes? How to communicate price increases and reductions?  57 Classic ways of price communication 3 Principles of a classic price communication approach to support a high-value brand: o Prices end in triple-nines and quadruple-nines, i.e., X9.99 or X99.99. o Significant discounts are shown in “double whole” dollars to enhance their perceived magnitude. o Variable discounts are shown as “percentage off” as a last resort, if the Reference:. range of discounted prices is really wide.  58 Innovative ways of price communication (1/3) “” “Explaining the price to customers is just as important as setting the price. Here, IKEA's "It's that affordable" price tags communicate just how affordable its furniture is by explicitly converting the price of its products to other (cheaper) everyday things that shoppers may buy more frequently. For example, a bookcase equates to two pizzas.” Reference:. Utpal Dholakia Professor of Marketing  59 Innovative ways of price communication (2/3) Ikea has transformed their prices into a new currency, into graphic symbols of everyday things. Reference:. https://vimeo.com/207427874  60 Innovative ways of price communication Steve Jobs relied on price psychology (i.e., defining an specific anchor/reference price) when announcing the price of the first IPad. Reference:. https://www.youtube.com/watch?v=gWtfFhQjEaU  61 When the price changes – either is increased or reduced - active communication matters (1/3) There is an asymmetry in the communication of price changes: o Businesses want customers to notice price reductions to the greatest degree possible. o However, in case of a price increase should escape notice in order to minimize negative effects on sales volume. Reference: , p. 366.  62 When the price changes – either is increased or reduced - active communication matters (2/3) A study found that for a consumer goods brand that… o … a price reduction combined with a high level of advertising can lead to very strong volume growth. If the price reduction is not supported by advertising, the volume growth is not significant. o … a price increase without advertising support has a strong negative effect on volume. If the firm accompanies the price increase by advertising, there is no noticeable decline in volume ! Reference:. The conclusion is that both price increases and price decreases call for appropriate support by advertising.  63 When the price changes – either is increased or reduced - active communication matters (3/3) o Price cuts: Should be supported by intensive communication, with the advantage of the lower price at the forefront. The goal is to increase the price elasticity (in absolute terms). o Price increases: Should be cushioned by enhanced communication efforts which emphasize product quality. The goal is to reduce the price elasticity (in Reference: , , p. 497ff. absolute terms). ! o For more tips on how to communicate price increases, see here. o For more information on how to conduct and communicate temporary price cuts (price promotions), which are popular in retailing, see here:.  “Price” in a digital world 4 Exemplary trends for “Price” that have been triggered or fostered by the digitalization.  65 “Price” in a digital world o The price you pay is “data” o Price transparency o Dynamic and personalized pricing techniques o Long-term price optimization with relationship-based pricing  66 The price you pay is “data”  67 There is always a price to pay: Even in the digital world, there is no “free lunch” o Online platform companies o exchange “free” digital goods and services for consumer data, reaping potentially significant economic benefits by monetizing data. o The two main monetization strategies to leverage this data to make money for the business are: Reference:. (1) data licensing (2) data-based targeting services  68 15% of businesses know how much you weigh. Which business has access to what data? The kind of data which companies collect include your name, date of birth and email address, but also people’s hobbies, height and weight and if they have pets. Reference:.  69 Recent regulatory initiatives are aim to reduce these practices o A basic principle of modern data privacy is to collect as little information as required and store it only for as long as necessary. This is called "privacy by design". o Recently, Apple has made a big change in this regard limiting the tracking of data through iOS devices. Meta (Facebook) stated that Apple's iOS privacy shift will lead to a $10 billion drop in revenue in 2022. Critics say that this iniative also Reference:. boost Apple’s own advertising products.  70 Price transparency  71 Price comparison webpages have empowered customers o Consumer use price comparisons extensively: o 80% of consumers compare prices online before deciding to purchase. o 65% of consumers check out price comparison websites on their mobile phones while in-store. o Retailers and brand manufacturers are reacting by acknowledging this and taking measure to address consumers’ need for price transparency. Reference:.  72 Even retailers take initiatives and pro- actively provide price transparency o To create customer trust and o thus, strengthen their brand, retailers start providing transparency on product- specific price history. o Example: In 2022, Digitec Galaxus has been the first online retailer in Switzerland to disclose the historical price Reference:. development of all its products.  73 Some D2C brands use price transparency to differentiate from the competition The fashion brand ”Everlane” aims to positions itself by providing detailed information on their production costs as well as their markup. In the screenshot the production cost of a pair of denim jeans are detailed. Reference: ,.  74 Dynamic and personalized pricing techniques  75 To address individual customers’ willingness to pay, firms move away from static prices Two pricing strategies that leverage the fact that customers’ willingness to pay varies based on their preferences/needs as well as other characteristics are getting more popular: (1) Dynamic pricing builds on time-based differentiation in prices to increase profits. (2) Personalized pricing builds on a segmentation according to the characteristics of the buyers (also based on, e.g., store location) Reference: , p. 209ff. (3) Personalized dynamic pricing as a combination of both techniques. read more For further ways to implement price differentiation, see , p. 209-238. All methods can be mixed and matched.  76 (1) Dynamic pricing How does dynamic pricing work? o Dynamic pricing largely builds on the concept of time-based price differentiation. This means that a seller charges different prices over the course of various time periods for a product which is otherwise identical in terms of location, performance, and volume in each period. o Examples include price differentiations based on o the time of day (telephone, electricity), o weekdays (admissions, transportation tickets, ski passes ), or Reference: , p. 230. o seasons (air travel, tourism).  77 (1) Dynamic pricing Examples Dynamic pricing was (1/2) first used on a large scale in the airline industry. Following the launch of the dynamic pricing model by American Airlines, the competitor went bankrupt, triggering a wave of adoption that Reference:. has been rising since.  78 (1) Dynamic pricing Examples (2/2) For some tech firms such as Uber, dynamic pricing is at the heart of their business model. These businesses use complex algorithms to adjust their prices to balance consumers’ demand for rides and the supply of drivers Reference:. willing to work. https://www.youtube.com/watch?v=vTWhsgs3ZRA  79 (2) Personalized pricing How does personalized pricing work? o Person-based price differentiation depends on a segmentation according to the characteristics of the buyers. The characteristics should reflect customers’ buying behavior. These could be o sociodemographic such as age (prices for children or seniors) o school status (college student, high school student), o work or group affiliations (associations, parties) o device that is used to browse the internet (e.g., mobile phone with Reference: , p.229f. Android or iOS). o Examples include discounts coupons printed on the Migros receipt or discounted tickets to seniors offered by transportation providers.  80 (3) Dynamic personalized pricing Beyond personalized versus dynamic pricing o Personalized dynamic pricing involves dynamically setting individual- consumer prices for the same product or service according to consumer-identifying information. o Despite its profitability, this pricing provokes strong negative fairness perceptions, explaining why managers are reluctant to implement it. See press coverage of respective trials at grocery retailer Kroger’s. o Real world case studies are rare. Airlines are evaluating the such dynamic personalized pricing systems for ancillary services such as in- Reference: ,. flight meals or additional luggage. For a respective academic experiment in context of a HR recruiting service, see [430, from minute 14 to 50].  81 Long-term price optimization with relationship-based pricing  82 Can pricing help with relationship marketing which aims to maximize long- term profits? o Relationship marketing involves maximizing the long-term profit generated by a customer. Relationship marketing is not specifically focused on price nor is it limited to price. It covers the entire marketing mix. Nonetheless, it offers many touch points for pricing. o Pricing can be an important instrument for customer retention. Pricing is among the key reasons for customer attrition. As reported by an industry study, 52% of customer cited service-related issues as the primary reason for switching, while 29% cited price and 18% identified Reference: , p. 286ff. poor product quality as their primary reason for switching.  83 How to implement relationship-based pricing? o How? Pricing policies aimed at increasing customer loyalty focus on price reductions by the seller depending on the duration or the intensity (in terms of revenue, purchase frequency, etc.) of the customer relationship. o Advantage: Price plays a central role in customer retention, in part because it is easier and faster to change than service, employee behavior, or product quality. o Disadvantage: When every competitor can simply duplicate that Reference: , p. 286ff. method, the only thing one has accomplished is the start of a downward price spiral. In the end, there is no net gain in customer loyalty, but prices end up at a lower level.  84 Examples of relationship-based pricing o Example for retention-oriented pricing is frequent flier programs which offer points which can be redeemed for future travel. Basically, they are a discount that builds on a future payback (in form of a reward) that only manifest after multiple flights have been taken to collect enough frequent flyer points. o Amazon’s “save and subscribe” service allows to customers purchase consumer goods at Reference: , p. 290f. a discount when they agree to have items automatically delivered from Amazon in fixed time intervals.  Ethical “price” issues 5 “Price” decisions have to consider potential ethical issues. Some managerial options should not be considered due to this.  86 Potential ethical “price” issues o Price deception (e.g., misleading reference pricing claims) o Price discrimination (e.g, personalized prices) o Price cartels (e.g., OPEC) o Predatory pricing (e.g., prices below costs) o Fraudulent refund policies Reference  87 Some examples: Retail worker reveals price deception practices in viral TikTok In the US grocery chain Kroger, a clerk removes a $2.49 price sticker and replaces it with a sale sticker where the sale price is the same $2.49, but the alleged original price is $2.99. Reference: ,. https://www.tiktok.com/@kekm_/video/7054189752127474990?is_from_webapp=v1&item_id=7054189752127474990  88 Some examples: Conforama confronted with allegations of price deception Conforama is facing claims of misleading pricing practices in Switzerland. The claims are that it violated the Price Indication Ordinance by artificially inflating original prices to simulate discounts. The french-speaking Swiss consumer protection agency has filed a lawsuit citing 88 cases of abusive pricing. Conforama denies wrongdoing, while the court will determine whether the company violated the Price Disclosure Regulation, which contains Reference:. specific requirements for price comparisons.  89 Some examples: Rihanna’s lingerie brand accused of price deception Prices for items in the online store defaulted to “VIP” pricing, without giving the option to purchase for a “regular” price. When navigating to the shopping bag, if an item had been added, a “Savage X Monthly Membership” was also added automatically, without changing the pricing. The only way of knowing thatmembership would result in more charges is by clicking a small “Learn More” button that explains it would incur a $49.95 monthly charge, or by reading a description to the right Reference:. of the checkout options.  90 Some examples: Amazon has been called out in the past for using predatory pricing (1/2) Experts claim that Amazon is engaging in "cut-throat competition". For example, Amazon buys a book for $13 and sells it for $9. As customers crave a discount, Amazon could continue to sell books at a discount until it has captured almost all of the Reference:. market share. https://www.cnbc.com/2014/06/30/amazons-predatory-pricing-questioned.html  91 Some examples: Amazon has been called out in the past for using predatory pricing According to U.S. court documents Amazon employed also other illegal tactics to guarantee that a seller has always the lowest price for a product on Amazon. In this context, Amazon also employed tactics from game theory, see for details. Reference:.  92 Recap: Key learnings of this session Pricing has a strong effect on the profit of the companies, but price management has its own set of challenges. There are three major pricing strategies: (1) value-based pricing, (2) cost-based pricing, and (3) competition-based pricing. The price-demand relationship is key optimize prices. Price elasticity is used to measure this relationship. Digitalization had significant impact on pricing. For example, it empowered consumers by creating more transparency as comparing prices and monitoring price changes became easier. Ethical price issues often go viral and harm a firm’s reputation.  93 Dig deeper into the topic Watch o Confessions of The Pricing Man Best Audiobook Summary By Hermann Simon: https://youtu.be/TRZceJMNYqc o Pricing of Apple products: https://youtu.be/t6VYByDYg7c o Dynamic pricing - How airlines set ticket prices: https://youtu.be/EhhLXZB3kRw Read o OPTIONAL: Customer Analytics in Python Course: https://365datascience.com/courses/customer-analytics-in-python/