MKTG 409 Week 9- Pricing Seg 1>> So, when we think about pricing, incidentally this is the wheel that we talked about, and this is something that I put up the first day. We're lookingat these marketing mix decision variables. We have finished the product area and now we're gonna be looking at the pricing area.So when we think about pricing, obviously an organization is interested in pricing the product in the right way to be able to generate revenue. And as we've talked about a little bit already, we know that the right price is not necessarily the lowest price. So when we think about pricing from the standpoint of what it means to customers, we have to recognize that we use price as consumers as an indicator of quality to some degree.Now I mentioned earlier, we talked about branding that we also use a brand as a representational of quality. Which is the case from many products especiallywhen we can't judge the quality of product for ourselves. Well, we also use price when we can't judge the quality of the product for ourselves.Price is used to represent quality for many different kinds of products. And so when we think about on the part of consumers the meaning of a high price, it can certainly translate into meaning that it's high quality. Sometimes, it can also mean, and the high price, can go with what we view as a premium product.And we also know that, at times, the price that's high, can stand for just a situation where we're getting ripped off, I mean certainly that occurs. So a high price certainly has a certain meaning to a customer doesn't it, and it can be a representationof higher quality. Likewise, when we think about what the meaning of a low price is, a low price can certainly mean that it's low quality, or it may mean that it's a good value.I wanna show you a video that deals with pricing. It's a video about a companythat is aggressive at pricing, and it's called the Dollar Shave Club.>> Hi, I'm Mike, founder of dollarshaveclub.com. What is dollarshaveclub.com? Well, for a dollar a month, we send high-quality razors right to your door.Yeah, a dollar. Are the blades any good? No. Our blades are great. Each razor has stainless steel blades an aloe vera lubricating strip and a pivot head. It's so gentle a toddler can use it. And do you like spending $20 a month on brand name razors? 19 go to Roger Federer.I'm good at tennis. And do you think that your razor needs a vibrating handle,a flashlight, a backscratcher and ten blades? Your handsome-ass your grandfather had one blade and polio. Looking good, papa. Stop paying for shavetech you don't need. And stop forgetting to buy your blades every month.Alejandro and I are gonna ship them right to you. We're not just selling razors. We're also making new jobs. Alejandro, what were you doing last month?>> Not working.>> What are you doing now?>> Working.>> I'm no Vanderbilt, but this train makes. So stop forgetting to buy your blades every month.And start deciding where you're gonna stack all of those dollar bills I'm saving you. We are dollarshaveclub.com and the party is on.>> So when we look at the Dollar Shave Club, certainly, they represent a company that is an aggressive pricer. They're coming in with a low price, right?And it could mean that it's a good value or it may mean that it is low quality. I decided to try it and I found out for this, in terms of just my ownview point that unfortunately the quality of the blades are low. As it turns out, this is just my perception of it and my experience I found out that in this case, that the low price meant low quality.I frankly found that the blades where at a quality level, the blades whether quality level, that were the quality of the blades that I was throwing away after I'd used a razor. That's kind of where the starting point was for me. Now, some of you may have tried it and you been perfectly comfortable with it and that's good.They do have a higher range of blade that they sell. And it's about, I believeabout $8 a month. I didn't try that. And what's interesting is that when I decided to no longer continue in the Shave Club, they didn't attempt to move me up to the higher quality blade.Which I found kinda surprising. Because I thought that, perhaps, if a person was withdrawing from the club because they didn't like the quality. That they might say to you, make you a special offer, for example. That for x amount of time, you could try this for an introductory price.At for the higher quality blades. I know people that have used the higher quality or have paid the higher price and they tell me that the blades are fine. But I didn't move on up to the $8 a month blades. But the point is to say that in my particular experience that the low price actually resulted in low quality.Now certainly, we know of situations where we've seen organizations adjust theprice downward and they've kept the quality the same and it's helped their business a great deal. It's made them much more competitive in the market place. We have seen that, for example, in the fast food industry with what we called value pricing.In the fast food industry, who started value pricing? Well, it was Taco Bell. They started value pricing, meaning that they kept the quality level the same but they brought the price down. And we certainly have seen other fast food organizations follow suit over a considerable period of time.I could remember taking my family to Taco Bell from time to time, when my kidswere at home and they were like maybe eight and 12 or something like that. Andat that time I always felt like that it was not a good value. We went because they wanted to go, but I have to say that as I looked at what we got I didn't feel that the value was very good.Now I will tell you one thing I found interesting about Taco Bell. And their menu offering is, Taco Bell has maybe about six ingredients. And they've got about 60 menu items. And I figured out, eventually, that with maybe sixingredients. Like cheese, and lettuce, and tomatoes, and onions, and a meat like product, and so forth, that they had different kinds of menu items because of how it was stacked, or rolled, or a hard shell, or a soft shell, and that's how they got up to about 60 items on the menu.But, I found that when they went to value pricing, they did a very smart thing. They did not reduce the quality of the food and they didn't reduce the size of the portions. They kept it the same. They simply brought the price down. And we call that value