Prompt 6: Evaluating Sources

By Shuting Qi and Allison Zwarka

In previous posts we have already discussed what integrated marketing is, using multiple marketing strategies to maximize profit. Moreover, the two most important theories in integrated marketing are the 4 P's and the 4 C's. As a recall, the 4 P's are Product, Price, Place and Promotion; the 4 C's are Customer, Cost, Convenience, and Communication. From these two tool the two most critical idea we can take away is that price is a key element. In this post I am going to go more in depth on what price entails.

Recently, there was an article published, How Customer Perceive a Price Is as Important as the Price itself, in Harvard Business Review. The thesis of this article states that lower prices can boost customer’s perceived value, but companies might not get the expected reaction from customers for two reasons. Firstly, the customers might not notice the price change at all. Secondly, there is a gap between company's and customer's views on how to value a given product. The article finally concludes that only adjusting price is not enough to gain customers. Rather, price power has more deciding factors.

Personally, I agree with the point of view from above, which simply states that lower prices will not help companies to be perceived well by customers. I have another explanation as to why this strategy fails.

First of all, let me introduce a fundamental idea in Business:
                                                 Profit = Revenue-Cost
In short, a company’s net profit is equal to the total product sales times the total product price, and minus the cost of making all the products.

Thus, to make a profit, the company must keep the cost lower than the revenue. When a company wants to lower the price in order to increase customers, there will be a risk of how costumes react the price changing. Customers might not notice the price changes due to the lack of marketing centered around making the public aware. At the same time, the price change may not be persuasive enough to buy.

To fill in the gap between the way customers perceive and companies perceive these changes, companies need to invest in marketing research (product in the 4 P's) to figure out who the target customers are and further research their preferences(customer in the 4 C's). Next, they should announce the sale or discount by using their findings from the marketing research. This way their customers are made aware of the price changes (Promotion in the 4 P's).

The 4 P's and 4 C's theories are the fundamentals of Business and Marketing. If the companies practice the aspects more precisely and carefully, they put themselves in a good position for success.

https://hbr.org/2017/01/how-customers-perceive-a-price-is-as-important-as-the-price-itself