Page 389 - Foundations of Marketing

356 Part 4 | Product and Price Decisions

who market to consumers without intermediaries can charge thinks that visitors to the Urban Farmz website will probably
almost as much—or sometimes even more than—consumers not click away to save a dollar or two by buying elsewhere,
would pay in a supermarket. In many cases, consumers are because then they’ll have to pay the other site’s shipping fee,
willing to pay a higher price for top-quality local products, as well as the Urban Farmz site’s shipping fee. Urban Farmz
and even more for products that have been certified organic will also have to set a separate wholesale price when it sells
by a recognized authority. Competition is a factor, however: the soap to local restaurants. Will this new soap be the prod-
consumers who browse the farmer’s market will quickly see uct that boosts Urban Farmz’s profits and turns the name into
9
the range of prices that farmers are charging that day for pep- a lifestyle brand?
pers, peaches, or pumpkins. Competition between farmers’
markets is another issue, as a new crop of markets appears Questions for Discussion
every season. 1. In the pursuit of profits, how might Urban Farmz use a
Urban Farmz, like other vendors, is adding unique and combination of cost-based, demand-based, and com-
complementary merchandise to its traditional lineup of agri- petition-based pricing for the products it sells? Explain
cultural items. Diversifying by selling certified organic soap at your answer.
its stand, online, and to wholesale accounts will “juice up the 2. Urban Farmz wants to price the organic soap at $ 15.95
brand,” as Caleb says. The producers of the organic soap sell it per bar, while the soap maker prices the same soap at
for $ 14 per bar on their own website, and they ask Urban Farmz $ 14 per bar. What perceptions do you think consumers
to avoid any conflict by selling at a higher price. Thinking fast, will have of each price? What recommendations do you
Caleb suggests a retail price of $ 15.95 per bar, saying that this have regarding this price difference?
will give Urban Farmz a reasonable profit margin. 3. Would you recommend that Urban Farmz use promo-
Will buyers accept this price? It’s time for some compet- tional pricing at the farmers’ markets where it regularly
itive homework. The lavender-lemon verbena scent is very sells its products? If so, which techniques would you
popular, and certified-organic products have cachet. Caleb suggest, and why?

NOTES

1
Based on information in Emily Bryson York, .com/_layouts/Dictionary.aspx (accessed April 18, Katie Zezima, “In Parts of the U.S., Farmers’
“McDonald’s Talks of Retooled Dollar Menu,” 2012). Markets Are Testing the Limits of Productivity,” The
Chicago Tribune , January 24, 2013, www New York Times , August 20, 2011, www
6
John Miley, “Warehouse Stores: Deal or No
.chicagotribune.com; Tom Gara, .nytimes.com; Elizabeth Weise, “Fresh Crop of
Deal?” Kiplinger, June 9, 2011, www.kiplinger
“KeepingMcDonald’s Going: McRib, Dollar Farmers Markets Is Spring Up,” USA Today ,
.com/quiz/warehouse-store-deals/ (accessed
Menu, and Soon, the Fish McBite,” Wall Street August 8, 2011, 5B.
February 20, 2013).
Journal , January 23, 2013, www.wsj.com; Jim
7 “America’s Biggest Rip-Offs,” CNN, February 2,
Burress, “Is the Dollar Menu Good for McDonald’s
2010, http://money.cnn.com/galleries/2010/ Feature Notes
Bottom Line?” Marketplace , January 23, 2013,
news/1001/gallery.americas_biggest_ripoffs/2.html
www.marketplace.org; www.mcdonalds a Based on information in Sylvia Rector, “Panera,
(accessed February 21, 2013).
.com (accessed January 23, 2013). Others Are Planning More Pay-What-You-Can
8 Alison Frankel, “Bookstores Accuse Amazon Cafes,” Detroit Free Press , February 22, 2012,
2
Stephanie Strom, “Frito-Lay Takes New Tack on
(Not Apple!) and Publishers of E-books Cartel,” www.freep.com; Peter Korn, “A Gentle Nudge
Snacks,” New York Times , June 12, 2012, www
Thompson Reuters, February, 2, 2013, Helps Panera Cares Fulfill Mission, Get Paid,”
.nytimes.com/2012/06/13/business/frito-lay-
http://newsandinsight.thomsonreuters.com/ Portland Tribune (OR), December 29, 2011,
strategy-aims-for-top-and-bottom-of-market.html
New_York/News/2013/02_-_February/ www.portlandtribune.com; Sarah Skidmore,
(accessed February 20, 2013).
Bookstores_accuse_Amazon_%28not_ “Panera Opens Pay-What-You-Wish Location
3
“The Profit Impact of Market Strategies (PIMS)
Apple!%29_and_publishers_of_e-books_cartel/ in Oregon,” Associated Press, January 12, 2011,
Overview,” The Strategic Planning Institute, http://
(February 21, 2013). http://abcnews.go.com; “Year Later, Pay-What-
pimsonline.com/about_pims_db.htm (accessed
9 Based on information in “Urban Farmz” video, You-Want Panera a Success,” Cleveland Plain
February 17, 2013). Dealer , May 16, 2011, www.cleveland.com;
Cengage Learning, 2011; Jennifer Shutt, “Market
4
Ferrari Store, http://store.ferrari.com/en/home- “Panera to Retool Latest Pay-What-You-Can
Benefits Farmers, Residents,” Delmarva Now
office/logic3-audio/headphones/ (accessed Idea,” Associated Press, July 10, 2013, http://
(Salisbury, MD), April 18, 2012, www
February 20, 2013). abcnews.go.com .
.delmarvanow.com; Jenna Telesca, “Farmers’
5 b
Dictionary of Marketing Terms , American Markets Grow 17%, Continuing Trend,” Supermarket Based on information in Alexander Chernev,
Marketing Association, www.marketingpower News , August 22, 2011, www.supermarketnews.com; “Rethinking Gillette’s Pricing with Dollar Shave’s
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