Use the Internet to research what your favorite retail store is doing in the four areas of price perception (proportional price evaluations, reference prices, perceived fairness, and gain-loss framing).
Compare and contrast the store’s methods of price communication as they relate to the strategies shared in Chapter 3.
Propose a plan that provides specific ways for the selected retailer to improve in the four aspects of price perception.
Classmate: (response only)
Amazon is a firm which has been tremendously successful in creating a low-price perception, despite not offering the lowest prices. Often, it appears that Amazon is undercutting competition, but it is not always the case; for example, on Black Friday Amazon lowered the price of its $350 Samsung TV by $100, selling it at $250, well below the competition. But in the same instance, Amazon raised prices on HDMI cables and other complementary products. Amazon knew that shoppers on Black Friday go for the best bargain; in other words, they are extremely price conscious. Secondly, they realized that the TV played a crucial role in winning over the customer from the competition, whereas small, insignificant complementary products did not.And this is just one example; Amazon uses its customer data to change millions of prices daily, and creating a low price perception is one of the objectives.
Amazon loyalists’ shop on Amazon.com trusting that they are getting a bargain. The Amazon value proposition certainly includes advantages that are more unique than the simple act of offering low prices (assortment, convenience, experience, speed, security), but it’s this perception of low pricing that helps make shopping on Amazon almost instinctual to many consumers. It’s this perception that keeps Amazon shoppers from checking other sites for lower pricing before hitting the “Place Your Order” button. It makes retail shoppers check their Amazon app before heading to the register. It’s enough to convince folks to make purchases with just an Alexa voice command or a Dash button-push without concern for how little visibility they have into actual market pricing.
Suggestions to improve their business.
Suggestion 1: The process by which you convert leads into paying customers. This is the measure of the effectiveness of your sales efforts. If you can increase your conversion rate from one out of ten to two out of ten, you can double your sales and increase profits. Improving your ability to sell and convert interested prospects into paying customers is one of the most important things you can do. And there is no replacement for ongoing sales training, both for you and for every single person who speaks to customers, either live or on the phone.
Suggestion 2: The amount that you must pay to acquire each paying customer. You should be continually seeking creative ways to improve your advertising and promotion so that it costs you less to buy each customer. This can impact and increase profits of your business dramatically.