Product Pricing The cost of an “everyday low price” toy: $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” pricing, and the number one retailer has brought many businesses to their demise because of their pricing strategy. Recently, Wal-Mart has expanded their sales niche to the toy department putting many specialty 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 attract customers, and two alternate methods of pricing marketers can use based on demand and reputation. Toy Pricing Pricing is an important aspect of every business. Chief Financial Officer’s (CFO) use pricing to create financial projections, establish a break-even point, and calculate profit and loss margins (Power Point, 2005). It is the only element 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 done to beat competitor prices in an attempt to fix the product’s 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 billion 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 pricing 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 transform the store into a more viable store for the entire family (D’Innocenzio, 2005). Other toy stores are not as fortunate. FAO In... ... middle of paper ... ...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 D’Innocenzio, 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.html Grant, L. (2004, October 11). Wal-Mart doesn’t plan to toy much with prices; last year’s cuts hurt other retailers and left giant thinking it slashed too much. Proquest Document. USA Today. Pg B8. Johnson, L. (1999). A review 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_n8843016 Loss leader. Retrieved on May 3, 2005 from http://www.absoluteastronomy.com/ encyclopedia/l/lo/loss_leader.htm Power 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
. G. Toys is a leading supplier of high quality dolls that are manufactured in two plants within Illinois, one in Chicago, one in Springfield. These dolls are sold in retailors throughout the United States and have an established, loyal customer base due to their high quality and popularity (Campbell & Kulp, 2004). In the last few years, due to rising production costs, their most popular doll, Geoffrey, has seen a decrease in profit margin. In this evaluation we plan to address G.G. Toys existing cost system and offer recommendations on whether management should change the costing system in both the Chicago and Springfield plant. We will calculate the costs of the Geoffrey doll, the specialty branded doll #106 and the cradles using the cost
Finally, Mattel should collaborate with quick service restaurants such as McDonalds and Burger King to include a Mattel toy, such as Hot Wheels, in kids’ meals. In 2006, the food industry spent over $360 million on toys and 36% of all fast food meals were served to kids, making toys the most popular form of marketing to children (Gagnon & Freudenberg, 2012). This is a unique opportunity for Mattel to increase their competitive advantage through a different marketing
This paper will cover the planning process of Galaxy Toys Inc. as they explore the possibilities of a new product launch. It will highlight what their current strengths, weaknesses, opportunities and threats are, and dive into what goals and objectives would best move the company forward. Lastly, it will provide a detailed future recommendation for the company as they progress forward in this new venture. Galaxy Toys, with the current CEO, George Jepson Jr., and their CFO, Edward Mercury, plans on launching a new toy line in hopes of helping them achieve their long-term goals of increasing sales, while reducing costs and focusing on utilizing new technology, incorporating innovation into the production, and reducing their carbon footprint.
Target Corporation is the second largest discount store in the United States, just behind Walmart who takes first place. An important part of what makes this store so popular is the supply and demand of certain products they offer and the quality of these products. There are two important variables that affect both supply and demand. The variables that have an impact on supply are the wages that are paid to workers and the price of key inputs. While the variables that have an impact on demand are customer income and the prices charged for goods sold at Target. By having a clear understanding of these variables and how they impact Target, we are able to understand current and future market conditions which can potentially help increase future sales.
Have you ever wondered why do prices end with .99 or why it is that business are always making some kind of deal? Are these deals as beneficial as the customer thinks they are? What about the items priced higher than usually. Most people tend to think the higher the price the better quality right? Well, these are some of the topics this paper is going to help you better understand. Price points, Prestige Pricing, and Odd-evening pricing are all common price games used in the business world today. Price points are the different prices stores use to manipulate the consumers into buying what they want them to buy. I am sure everyone has wondered exactly what goes into the pricing of the items they purchase or what is it about these deals that keep luring me into the stores. Price gaming is a tricky business and businesses love how well it can manipulate the customer into believe and thinking a certain way. Showing you these three common price games will help you better understand and help you evaluate your purchasing decisions a little better.
Both companies will face challenges, however. For Amazon.com, the test will be to make sure its complex fulfillment systems integrate seamlessly with Toysrus.com's. The eTailer must also coordinate the tricky placement of products in distribution centers to avoid cost overruns. Toysrus.com is faced with finding the right balance between supplying Toys "R" Us stores and the web site with "hot" toys, so as not to disappoint customers. Furthermore, to make orders profitable, it must get people to buy multiple products.
Wal-Mart's history is one of innovation, leadership and success. It started with a single store in Rogers, Arkansas in 1962 and has grown to what is now the world's largest - and arguably, the most emulated - retailer. Some researchers refer to Wal-Mart as the industry trendsetter. Today, this retailing pioneer has annual revenues of over $100 billion, 3,000 stores and more than 750,000 employees worldwide. Wal-Mart operates each store, from the products it stocks, to the front-end equipment that helps speed checkout, with the same philosophy: provide everyday low prices and superior customer service. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale which reduce its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart’s ability to replenish theirs shelves four times faster than its competition is just another advantage they have over competition. Wal-Mart leverages its buying power through purchasing in bulks and distributing the goods on it’s own. Wal-Mart guarantees everyday low prices and considers them the one stop shop.
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
This shows that the two companies’ sports cars are strong substitutes for each other as more people purchased the cheaper one. By decreasing the price $3, Walmart was able to take 10,000 sales from Toys R Us. If it was a poor substitute, this price change would not have had such a large impact on the quantity sold.
Retailers should analyze their product mix and customer knowledge needs before positioning the price. Price has a significant influence on consumers' purchase behavior and consequently on firm sales and profits.
Toys R Us is the single largest toy retail store in the world. This means that how the business fits into the economy and how it affects other stores’ pricing, strategy, product offers, incentives, business decisions, etc. is quite significant. Toys R Us supplies a demand for toys to free market participants, and strives to be the biggest and best at doing so. They certainly have a comparative advantage in the selling of toys. Any toy company would want their toy to be accessible to the most people possible, and what better way than to get on the shelves (virtual even) of Toys R Us? They have a lot of money and this gives them advantages like buying exclusivity of a toy, spending more money on advertising/marketing than other businesses, accessibility, and speed of production. They spend money on running the business like any other business, and with their business at the top, everyone else is paying attention to their business decisions in order to react and stay competitive. Toys R Us’ impact in the toy market is undoubtedly
"Wal-Mart: The High Cost of Low Prices." Top Documentary Films. Web. 8 Aug 2011. .
price as the major decision-making tool for customers (“Global Consumer Electronics”, 2013). This lack of
Best Buy opened it’s doors in 1966 by the name of “Sound of Music”, it wasn’t until 1986 that it proceeded to change it’s name to what it is recognized today. Best Buy is the top retailer in the nation’s (USA) consumer electronic retail industry. What makes Best Buy unique is that they sell electronics and appliances used for home and office, they provide customer service and business support through their Geek Squad Technical Support System, and they offer major tech brands and their products such as Apple and Windows in house. According to The New York Times, the computer and electronics industry consists of companies engaged in the retailing of computers and peripherals, consumer electronics and other technology products. The industry includes household appliances, audio and video equipment, consumer software, digital cameras, cell phones and components and other electronic goods.” Like many top leaders, Best Buy has not been immune to issues in regards to maintaining its status in the market. Some of the issues the company faces include, loss in stock value, loosing the retention of it’s customers, and being out-competed by e-commerce companies in the same industry such as, Amazon. All of this can be classified as a marketing problem Best Buy faces.
Walmart needed high levels of growth to continue to survive and saturation of domestic market. Global retail expansion has attracted many large-sized companies with targets to increase business profits and market share. Global expansion not only attracts large organizations but also small to medium-sized companies, companies new to international expansion, as well as those who are already expanding in the international arena. However, there are also well-known retailers who failed in their expansion in certain global markets due to regulatory, legal and cultural challenges, competition, and attempting to change local shopping behavior. The lower pricing strategy was their basic strategy to expand Walmart’s philosophy, “Every Day Low Price” to all parts of the world. The only challenge was the distribution system; the company had given in to union demands from the state-run. Walmart was not influenced. The marketing strategies still involved huge discounts and great values on all of their products, similar to strategies in their home country: maintaining low prices every day, especially middle-class customers, yet maintaining profits. They also suggested