Page 365 - Foundations of Marketing

332 Part 4 | Product and Price Decisions

and we expect to pay more for it. With respect to the type of target market, adults frequently
must pay more than children for products and services, including clothing, meals, and movie
tickets. The purchase situation also affects the buyer’s view of price. Most moviegoers would
never pay in other situations the prices charged for soft drinks, popcorn, and candy at conces-
sion stands. By assessing the target market’s evaluation of price, a marketer is in a better posi-
tion to know how much emphasis to put on price in the overall marketing strategy. Information
about the target market’s price evaluation may also help a marketer determine how far above
the competition the firm can set its prices.
Today, because some consumers are seeking less-expensive products and shopping more
selectively, some manufacturers and retailers are focusing on the value of their products in com-
munications with customers. Value is more than just a product’s price. It combines price with
quality attributes, which customers use to differentiate between competing brands. Generally,
consumers want to maximize the value they receive for their money. Consumers may even
perceive products to have great value that are not the least expensive, such as organic produce,
if they have desirable features or characteristics. Consumers are also generally willing to pay
a higher price for products that offer convenience and time savings. Companies that offer both
low prices and high quality, like Target and Amazon, have altered consumers’ expectations
about how much quality they must sacrifice for low prices. Understanding the importance of
a product to customers, as well as their expectations about quality and value, helps marketers
correctly assess the target market’s evaluation of price.

LO 3 . Understand demand and ANALYSIS OF DEMAND
the price elasticity of demand.
Determining the demand for a product is the responsibility of marketing managers, who are
aided in this task by marketing researchers and forecasters. Marketing research and forecast-
ing techniques yield data such as estimates of sales potential or the quantity of a product
that could be sold during a specific period. These estimates help marketers to establish the
relationship between a product’s price and the quantity demanded.

Entrepreneurship in Marketing

The Dollar Shave Club Shaves Shaving Prices

Entrepreneur Michael Dubin believes that people pay too which adds to the final price paid by customers. Dollar
much for replacement razor blades. His web-based busi- Shave Club does things differently. Its direct marketing
ness, Dollar Shave Club, shaves the price and delivers approach keeps costs low because no intermediaries are
fresh blades directly to each customer’s mailbox, month involved and the blades don’t need eye-catching packag-
after month, on a subscription basis. Monthly pricing ing for in-store visibility. As a result, Dollar Shave Club
starts at $ 1 plus shipping fees for a package of five twin- can make its competitive case on the basis of price and
edge blades. Customers receive a free razor when they convenience.
subscribe, and they have the option to upgrade to higher- Now Gillette, which usually emphasizes shaving
priced four-edge or six-edge blades at any time. technology, has begun advertising its blades on the basis
Dubin contrasts his blades-by-mail subscription of quality and value. The idea is to educate customers
pricing with the more expensive packages of replacement about how long a Gillette blade remains sharp and gives
blades marketed by multinational corporate competitors a good, close shave. Will Dollar Shave Club’s low prices
such as Gillette and Schick. Both use traditional mar- give it the edge it needs to capture market share from
b
keting channels to get their blades onto store shelves, Gillette and Schick?

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