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Pricing Strategy Case

Chantell Grant, Charles Adams, Deneen McCall, Jeffonia Pankey

MKT/431

March 25, 2016

Ernie Wake
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University of Phoenix Material 
Pricing Strategy Case Assignment

Review the “What’s the Right Price” case on pages 382­383 in the Essentials of 
Entrepreneurship and Small Business Management text. Complete each section below. Be sure 
to cite your sources when necessary (including all uses of the textbook). 

1. Product Pricing and Company Image

In 3­5 sentences, explain why so many entrepreneurs underprice their goods and services, 
especially when they first get into business. 

Pricing always plays a critical role in a firm’s overall strategy; pricing policies must be 
compatible with a company’s total marketing plan and the image it intends to create in the 
marketplace is a process that new entrepreneurs must consider to avoid underpricing their 
goods and services. Pricing their products too low is a common and often fatal mistake for 
new businesses; entrepreneurs are tempted to underprice their products and services when 
they enter a new market to ensure their acceptance or to gain market share quickly. Many 
entrepreneurs make the common pricing mistake of failing to recognize the extra value, 
convenience, service, and quality they give their customers—all things that many customers 
are willing to pay for (Essentials of Entrepreneurship, Ch.10). The bottom line for new 
entrepreneurs is that lowering their price without developing a strategy can lead to a price 
war and this is something that no one wants, “no one wants to race to the bottom.”

Discuss, in 3­5 sentences, the connection between the prices a company establishes for its 
goods and services, and the image it creates for the company.

Setting the right price is very important for customers if the price is to high it will deter customers
from shopping there and it affects the company’s sales, if the price is too low, it also can deter certain
customers from shopping at their business and makes the company seems as though it sells an
inferior product with poor quality and this can create a poor image of the company, and it will or can,
affect the success of the company. By establishing a price, a company not only affects their success,
but it also affects the psychological mind set of the customer by giving the customer a perception of
the company and what the customer sees as value and how it sees the value of the company based
on the cost associated with the company’s products. For many consumers, as well as businesses,
pricing creates an image that speaks of the products and company value, but also to the customers
social standing, for being known for buying a high priced, exclusive, limited – edition, products. It
creates an image both for the company and for the purchaser of the product and is a psychological
force that creates a premium pricing strategy for a business. The bottom line for companies is what is
their strategy is it to compete in the price strategy or is it to establish a high end quality brand.
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2. J. Hilburn’s Pricing Strategy

Describe the advantages and risks associated with J. Hilburn’s pricing strategy.

What advantages does J. Hilburn’s pricing strategy create for the What risks are associated with the co
company?

3. Pricing Advice

Visit the website for J. Hilburn. In 3­5 sentences, what advice on pricing can you offer Hil 
Davis?  
Currently J. Hilburn has pricing tiers to assist a consumer in selecting the best
item that fits their budget. The tiers range from Blue Label ($89), Brown
Label ($109), Burgundy Label ($139) and the Black Label ($159). To
maintain a loyal consumer J. Hilburn needs to remain consistent in their
pricing structure. They have only increased pricing by 8% on one
occasion, and since that time sales have steadily increased. Therefore to
remain relevant within the apparel industry they will need to continue to
expand their offerings to gain incremental revenue. J. Hilburn has
accomplished the necessities to convey their companies’ message
through pricing. Their consumers can always refer to them for high
quality product, and an affordable price with personalized attention.

      Discuss in 3­5 sentences how Davis should implement your pricing suggestions.

Davis should implement the anchor pricing structure. Currently Davis utilizes the psychological
pricing structure and below competition pricing module. If Davis implements anchor priingin they
would gain more consumers by comparing their prices to comparable items. The company prides
themselves on offering high quality below market price, however a less experienced consumer
would not realize their potential savings with our a comparison price structure.
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4. Brick-and-Mortar Comparison

How might your pricing change if you were a brick-and-mortar retailer versus an online retailer?

      

Type of Retailer Pricing

A Brick-and-Mortar Retailer is an establishment that has a physical

Brick-and-Mortar location and offers in-person customer experience. Due to the physical
location brick-and-mortar pricing differs from online retailers.
According to "Factors That Affect Pricing Decisions" (n.d), this form
of retailers offers that face-to-face interaction and pricing is based on
things that take place in the actual store such as customer’s word of
mouth feedback, customer needs, the economy and the competition.

For example, If I was shopping in Macy’s for a hand bag but noticed
the competitor had the same hand bag for 40% cheaper I am going to
shop with the competitor. However, this can have an effect on Macy’s
pricing decisions because they would more than likely meet the
competitor’s price to keep me as a loyal customer.

An Online retailer is an e-commerce business that do not have a

Online physical location and does not offer in-person customer experience.
Due to not having a physical location online retailers pricing differs
from brick-and-mortar retailers as sites tailor prices to customer’s
based on their digital habits and demographics (Alba, 2014).

For example, when your computer or mobile device tracking cookies

are enabled it tracks if one has visited the site before. If you have
visited a particular site or shopped with them in the past you may
receive some form of discount to entice you to shop again. However, if
you clear your browser you will not receive this offer as the search
engine cannot identify if you have previously been on the site or
shopped with the business.
 
References:
Factors That Affect Pricing Decisions. (n.d). Retrieved from
http://2012books.lardbucket.org/books/marketing-principles-v1.0/s18-02-factors-that-affect-
pricing-de.html
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Alba, D. (2014). Online Stores Changes Prices Depending On How You Shop. Retrieved from 
http://www.wired.com/2014/11/online­price­discrimination/

Scarborough, N. (2016). Essentials of Entrepreneurship and Small Business Management, 8th ed.
Prentice Hall