Determining the right price for a product or service is complicated. Marketers need to first determine the strategy that is best for meeting the objectives. Does the organization want to establish a beach-head and gain market share (at a low price), or does it want to reach the elite purchasers (at a higher price)?
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. But finally, and perhaps most importantly, 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 champion racing pigeon? In many instances, the correct price is the price that someone will pay for the item. This is different than what the item might be worth in general – it is what the item is worth to that one particular buyer.
Take pets as an example. How much are people willing to pay for a pet? Or consider an animal that brings prestige, and perhaps even monetary gains, to a buyer – animals such as thoroughbred horses, or racing pigeons – that bring prestige and monetary gains to owners. What are they worth?
Recently, ‘New Kim’, a champion racing pigeon, recently fetched the amount of $1.9 million, breaking sales records for such a bird! Two bidders (operating under the names of ‘Super Duper’ and ‘Hitman’) drove up the purchase price to the record amount, surpassing the $1.6 million spent last year on another champion racing pigeon named ‘Armando’. The same Chinese owner is thought to have bought both pigeons.
How much are you willing to pay?
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://youtu.be/kNmk5Jw5rbY
- 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 (such as clothing.), and luxury items (such as Louis Vuitton handbags), and rare (such as racing pigeons).
Source: Associated Press; other news sources