Why are Prices Going Up?

Pricing is a very strategic part of marketing and planning. And, yes, price is also one of the four P’s and is usually referred to as a tactic. However, when an organization is setting strategic objectives, the price level is a critical factor that may be adjusted to help a company meet its objectives. However, raising prices can be difficult as consumers tend to balk at paying more for a product or service that they have had for years. Among companies raising prices are two affecting many college students: Netflix and Whole Foods.

In January, Netflix raised prices for its subscription plans by 18% to $13/month. The increase is intended to help Netflix cover increasing costs for original content and streaming services. Some of its highly-rated content includes “Bird Box,” “Stranger Things,” and “The Crown.” According to Netflix, it has 10% of all U.S. TV screen time, or a billion hours each day.

In February, Whole Foods raised prices on hundreds of its products in order to cover increasing costs of inflation, including transportation, ingredients, and more. The price increases range from a few cents to several dollars, depending on the product and manufacturer.

Is it worth the price?

Group Activities and Discussion Questions:

  1. Question students: Why are Netflix and Whole Foods raising prices? How does the price increase fit into the company’s strategy? What environmental factors should be considered?
  2. Show a video about Netflix price increase: https://mashable.com/video/netflix-raises-prices/?jwsource=cl#tzDtP.YOImq1
  3. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  4. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  5. Divide students into groups and have each group work on any/all of the six steps.
  6. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).

Source: Ad Week, Wall Street Journal, other news sources

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