Customer Relationship:
- Commitment/ bond or connection between a firm and customers
- Weak relationships=open market; customer is easily persuaded to purchase from other firms because no loyalty exists
- Strong relationship= like family (high customr loyalty)
Types of Customer Relationships:
- intellectual: customer evaluates pros and cons and decides between A and B
- emotional: makes the customer feel good/ high loyalty/ repeated purchases/ used for a while
- Creates trust that the seller will provide good value
- feel that the brand represents who they are
- positive feeling
- promote the seller to friends, family, and acquaintances
- seek out and actively read the seller’s promotional material
Relationship between Price and Demand
- Price affects the demand curve
- More expensive, less demand
- Price is a sign of quality
Fairness in Pricing
- Consumers often thinks about pricing in terms of how fair the price is
- factors take into consideration when determining fair prices: (1) Past Prices (2) Close-substitute Prices (3) Context (purchase environment)
Enhanced Opportunities for Dynamic Pricing Strategies
- Decreased Menu Costs: costs associated with changing the price of a good. In a sote or a mail order catalog, there are costs associated with changing costs, but on the Internet, this is easy and virtually costless
- Interactivity: the Internet makes it easy and much less costly for buyers and sellers around the world to interact and negotiate
Price-discrimination strategies
- First Degree: involves getting consumers to pay exactly what they are willing to pay for an item. Implies that in order to charge each consumer exactly what they are willing to pay, firms must know what each consumer’s demand curve is (unrealistic). It’s more realistic for the merchant to ascertain more information from consumers to gauge what they are willing to pay.
- Second: Degree: Firm is trying to ascertain how much consumers are willing to pay not only for the first unit of a goods, but for each additional good.
- Third Degree: Most common type of price discrimination. Involves classifying consumers by category according to their willingness to pay (by age at theatres and airline pricing).
- Firms would want to implement these strategies because price-discrimination increases demand since prices are being decided upon consumer’s willingness
Static and Dynamic Markets