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Price Offs

What is it ?

A price-off refers to the reduction of a price for a temporary period of time to a consumer. The customer may view the price reduction on the product itself or with regards to methods such as display, or signage. These tactics are designed to create interest for the consumer in hopes that he or she will make a purchase regarding the product. Price-offs has its advantages and weaknesses like other marketing strategies covered in this course.

Why it is useful?
Some of the advantages regarding price-offs are discussed in this section of the report and details how it benefits both the consumer and the company. For example, the reduction of the price leaves brand users feeling good about the product as they may feel they are being rewarded. Obviously this is going to cause more consumers to stay “ on board “ with the brand and retains the loyalty of their customer base. Another useful tactic price-offs allows is the temptation of a person to buy more if they feel they are getting something else for less. People will often spend money just to spend money and seemingly have little willpower over this and simply make the purchase because it was cheaper even though they may not normally consume this product. For example one might buy a chocolate bar at seventy per cent of the price and with the money they have left may buy another product in the store such as bottle of pop or a bag of chips. Businesses will often use the “ buy one, get one free’’ gimmick to help increase in interest in a product. Customers of a priced off product will tend to repeat their purchase over a steady period of time and this is due to the incentive that “ cheaper is better ‘’ as customers may be willing to sacrifice quality for quantity at certain prices. For both the consumers it is balancing the scales between quality and quantity or a product, while for the company it is question of how high is too high and how low is too low? Price-offs also allow for a company to test a new product because of its limited financial consequences should that product suffer a colossal failure. The biggest advantage of a price- off however is that there is an immediate reward and no waiting is required. The same cannot be said for other tactics companies use for advertising purposes.

What are the Weaknesses?

Price offs can be damaging to a company`s expected profits at the end of the year as the general rule seems to be that it takes four times as many increase in sales to neutralize the reduced costs. How much a person uses price for a criteria for making a purchase also provides a problem for sellers, as price sensitivity states, it becomes the only factor involved for some people when making purchasing decisions. This can lead to a company giving too much power to the consumer side in the war of dictating of prices.

www.lanuitsalon.com
www.docstoc.com/docs/27849498/Professor-Paul-Herbig
www.marsdd.com/entrepreneurs-toolkit/articles/sales-promtion-Kotler-on-marketing
www.hinduonnet.com/businessline/catalyst/2001/12/20/stories/1920o052.htm
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