Page 129 - Marketing the Basics 2nd
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goods you regularly buy at a supermarket, we can only think of bread and beer! These stores make sure they advertise low prices on those few items that consumers know, so when customers see those low prices they assume that other prices are also low, creating a positive halo effect of low cost for the store.
GOING-RATE PRICING
Going-rate pricing entails the producer pricing its product strictly according to the price charged by competition. This pricing method is often found in commodities markets, where the differentiation between products is virtually nil. Marketers hate commodities because it is hard to make a profit unless you are the lowest cost producer; of course, there is logically only one low-cost producer so every other firm competing with them will be scrambling for profit. That is why marketers always try to differentiate in a way relevant to the customer and in a way that the customer will accept that you really are different from your competition. It doesn’t always work but nevertheless we never give up the good fight! One of the authors once taught a course to the Vice President of Marketing for the Canadian Wheat Board. Talk about a potentially undiffer- entiated product – the government of Canada certifies that the wheat is Grade A and so on. Yet he said that they manage to differ- entiate what is almost the same physical product in 24 different ways. For example, they sell the wheat to Italy for pasta and alter the product to make it better for pasta making, something quite important in Italy. Meat firm, Maple Leaf Foods works with farmers to raise pigs which have been bred specifically for the demanding Japanese market, allowing them to charge a healthy premium for a product for which Japanese consumers are happy to pay extra, so everybody wins.
AUCTION PRICING
The attraction of the auction is that it saves the producer the trouble of determining the consumer’s perceived value of the product; the auction allows the consumer to do so on her own accord. There are three types of auctions:
