Product Pricing Essay -- essays research papers

Product PricingThe cost of an e reallyday number one damage monkey $19.95. The cost of a Rolex watch $2,465. A great paper explaining why corporations put these prices on products priceless. Wal-Mart has become the leader in everyday low price set, and the number one retailer has brought many an(prenominal) businesses to their demise because of their pricing strategy. Recently, Wal-Mart has expanded their sales niche to the toy department putting many strong point toy stores near or completely out of business. This paper will discuss how Wal-Mart priced their line of toys, why Wal-Mart used toys as loss leaders to take out customers, and two alternate methods of pricing marketers can use based on demand and reputation. Toy PricingPricing is an important aspect of every business. school principal Financial Officers (CFO) use pricing to create financial projections, establish a break-even point, and calculate profit and loss margins ( effect Point, 2005). It is the only elemen t in the marketing mix that produces revenue. Price is also one of the most flexible elements of the marketing mix as it can be changed very quickly. This is usually pay off to beat competitor prices in an attempt to fix the products market value position very low (Anderson & Bailey, 1998). After all, high prices make it difficult to become the market share leader. The leading US retailer, Wal-Mart, is an expert at low product pricing as evident in 2004 with $250 million dollars in sales to their 138 million weekly shoppers. However, they are also responsible for reducing prices so low that it drives specialty stores out of business. This is the effect Wal-mart has had on many toy stores and has almost closed the doors of the famous toy store Toys R Us Inc.Wal-Mart set extremely low prices on toys in a very successful pricing strategy to attract customers and become the leader in toy sales (Grant, 2004). This pricing strategy is called market penetration pricing. Penetration pric ing is used to enter the market quickly and win a large market share (Anderson & Bailey, 1998). These low prices have taken their toll on toy stores. Toys R Us is now the second largest toy seller in the U.S. behind Wal-Mart. Toys R Us was recently bought for $6.6 million by investors who hope to understand the store into a more viable store for the entire family (DInnocenzio, 2005). Other toy stores are not as fortunate. FAO In... ...2004, October 12). Wal-Mart wants $10 cds. Rolling Stone. Retrieved on may 2, 2005 from http//www.rollingstone.com/news/story/_/id/6558540/thekillers?pageid=rs. Home&pageregion=single1&rnd=1097616001120&has-player=unknown DInnocenzio, A. (2005, March 18). Toys R Us deal may reignite the industry. The San Diego Union Tribune. Retrieved on April 25, 2005 from http//www.signonsandiego. com/uniontrib/20050318/news_1b18toys.htmlGrant, L. (2004, October 11). Wal-Mart doesnt visualise to toy much with prices last years cuts hurt other retailers and left g iant thinking it slashed too much. Proquest Document. USA Today. Pg B8.Johnson, L. (1999). A study and a conceptual framework of prestige-seeking consumer behavior. Academy of Marketing Science Review. Retrieved on May 4, 2005 from http//www.findarticles.com/p/articles/mi_qa3896/is_199901/ai_n8843016Loss leader. Retrieved on May 3, 2005 from http//www.absoluteastronomy.com/ encyclopedia/l/lo/loss_leader.htmPower Point Presentation (2005, May 1). Touro University International. Marketing 501 CD.Price skimming. (2005). Invetopedia.com. Retrieved on May4, 2005 from http//www.investopedia.com/terms/p/priceskimming.asp