Determining the right price for a product or service is not always easy. Organizations need to determine the strategy that is best for meeting its objectives. Does the organization want to establish a beach-head and gain market share, or reach the elite purchasers? Pricing strategies include demand-oriented, cost-oriented, profit-oriented, and competition-oriented approaches. Within these various approaches are price models that include skimming, penetration, luxury, bundling, price-lining, return-on-investment, and more. And finally, do not discount the strong appeal used with psychological pricing.
All these strategies are interesting, but how does one apply them to a unique product such as a rare Stradivari viola made in the 1700s? Or a prized Belgian racing pigeon? In the case of the Stradivari, the auction price starts at $45 million. For the pigeon (named Armando) the auction price rose to $1.4 million in approximately and hour as two Chinese buyers kept increasing their competing bids trying to obtain the world’s fastest pigeon! Armando is believed to be the most expensive bird ever to be sold at auction. The attraction to the Chinese buyer was likely due to the sport of pigeon racing becoming more popular among the countries elite.
So, next time you see a pigeon sitting on a statue on the park, consider how valuable the little guy might be.
Group Activities and Discussion Questions:
- As class begins, poll students about pets and pricing. Ask who has a pet and how much they paid. Ask other students if they were going to buy an animal, how much would they consider spending?
- Show a video about the Belgian pigeon: https://www.youtube.com/watch?v=Z2SwXWV5Rec
- The auction site (with additional video) can be found at: https://www.pipa.be/en/newsandarticles/reports/armando-joel-verschoots-record-breaking-pigeon-video
- Discuss pricing strategies (e.g., demand-oriented, cost-oriented, profit-oriented, competition-oriented, etc.).
- Divide students into teams. Have each team select a different price approach and determine a SMART objective for the approach.
- Next, have students use their selected price model to determine prices for the ordinary products (e.g., milk, gas, eggs, etc.), shopping products (e.g., shoes, jackets, etc.), and luxury items (e.g., Tiffany, Louis Vitton), and rare (e.g., Tibetan Mastiff, Stradivari viola).
Source: Belinger, J. (19 March, 2019). Chinese buyer bids record $1.4 million for racing pigeon. CNN