Chapter Outline1. Introduction
a. Toys ‘R’ Us emerged in the late 1970s as a toy retailing “category killer,”offering consumers a vast selection of toys at everyday low prices. Smaller stores and toy departments failed because they couldn’t match Toys ‘R’Us’s selection, convenience, and low prices.b. In the 1990s, however, Wal-Mart offered not just everyday-low-prices ontoys, but rock-bottom prices.c. Toys ‘R’ Us fought back by trying to match Wal-Mart’s super low prices,but with disastrous results. By early 2005, Wal-Mart held a 25 percentshare of the toy market; Toys ‘R’ Us’s share had fallen to 15 percent.d. Toys ‘R’ Us now has new owners and will likely develop a new gameplan. The chain is stepping back from cut-throat price wars that it can’twin. It’s emphasizing top-selling products and higher-margin exclusiveitems. It is improving store atmosphere. Still, Toys ‘R’ Us faces an uphillbattle to win back the now price-sensitive toy buyers it helped createdecades ago.
Let’s Discuss This
As the economy comes out of the recession and subsequent slow growth of the early2000s, how might companies now use the better economic environment to raise prices?As a consumer, do you wait for sales to buy, or when you want something, do you go buyit whether it’s on sale or not?
2. What Is a Price?
In the narrowest sense,
is the amount of money charged for a productor service. More broadly, price is the sum of all the values that consumersexchange for the benefits of having or using the product or service.b. Historically, price has been the major factor affecting buyer choice. Inrecent decades, nonprice factors have gained increasing importance. Priceremains one of the most important elements determining a firm’s marketshare and profitability.c. Price is the only element in the marketing mix that produces revenue; allother elements represent costs. Price is also one of the most flexibleelements of the marketing mix.d. Pricing is the number one problem facing many marketing executives, andmany companies do not handle pricing well. A frequent problem is thatcompanies are too quick to reduce prices in order to get a sale rather thanconvincing buyers that their products are worth a higher price. Other common mistakes include pricing that is too cost-oriented and pricing thatdoes not take the rest of the marketing mix into consideration.e. Smart managers treat pricing as a key strategic tool for creating andcapturing customer value. Prices have a direct impact on the firm’s bottomline.200