END-OF-CHAPTER SUPPORT
MARKETING DEBATE—Is the Right Price a Fair Price?
Prices are often set to satisfy demand or to reflect the premium that consumers are willing
to pay for a product or service. Some critics shudder, however, at the thought of $2 bottles
of water, $150 running shoes, and $500 concert tickets.
Take a position: Prices should reflect the value that consumers are willing to pay versus
prices should primarily just reflect the cost involved in making a product or service.
Pro: Price, perhaps more than any other element of the marketing mix, communicates
value to the consumer. In the consumer decision-making process, we have learned that
customers are value-maximizers. They form an expectation of value and act on it. A
Con: Marketers have an obligation to the consumers to produce products (or services) that
meet consumer needs at the lowest price possible. Fair pricing does not assign any
consumer “value” definition into its equation and it should not because each consumer
MARKETING DISCUSSION
Think of the pricing methods described in this chapter—markup pricing, target-return
pricing, perceived value pricing, value pricing, going rate pricing, and auction-type
pricing. As a consumer which method do you personally prefer to deal with. Why? If the
average price were to stay the same, which would you prefer: (1) for firms to set one price
and not deviate, or (2) to employ slightly higher prices most of the year, but slightly lower
discounted prices or specials for certain occasions.
Student answers will differ. However, the following notation from research is worth
re-enforcing during the class discussions.
Marketing Excellence: eBay
1. Why has eBay succeeded as an online auction marketplace while so many others have failed?
Suggested Answer: eBay’s success truly created a pricing revolution by allowing buyers to
2. Evaluate eBay’s fee structure. Is it optimal or could it be improved? Why? How?
Suggested Answer: eBay’s pricing structure was developed to attract high-volume sellers and
3. Discuss Donahoe’s vision for eBay. Is moving away from online auctions sustainable for the
company?
Suggested Answer: Students answers will vary. Some might suggest that eBay will become or
Marketing Excellence: SOUTHWEST AIRLINES
1. Southwest has mastered the low-price model and has the financial results to prove it. Why
don’t the other airlines copy Southwest’s model?
A few airlines are copying Southwest: JetBlue, RyanAir, and Asia Airlines to name a few.
2. What risks does Southwest face? Can it continue to thrive as a low cost airline when tough
economic times hit or other airlines mimic its business model?