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1 January 2015The Undercover Economist
Chapter-21
The Undercover Economist
-Tim Harford
1 January 2015The Undercover Economist
Chapter-22
What Supermarkets don’t Want You To Know
Scarcity power alone cannot force to pay
Unlimited Price
People may choose to pay or not
Dilemma:
Higher margin - Few CupsLower margin - More Cups
HOW?!?
1 January 2015The Undercover Economist
Chapter-23
Strategy of 2 Café
Fair trade Policy Variation in Price
Customer Mentality
•Support
•Price is not a constraint
Variation of alternatives
Bad Public Relation Giving customer opportunity
1 January 2015The Undercover Economist
Chapter-24
Unique Target Strategy
• Strategy of car salesman / estate agent
• Evaluate Customer : Individual
Basis of Charge : Customer Affordability
• Example :
1 January 2015The Undercover Economist
Chapter-25
Group Target Strategy
• Offer different price
• Evaluate Customer : Distinct Groups
Basis of Charge : Price Sensitivity
• Example :
1 January 2015The Undercover Economist
Chapter-26
Self-Incrimination Strategy
• Persuade Customers into confessing that they are
not sensitive to price&bring willingness to pay
• Companies tend to take maximum advantage of
scarcity power
• Example : Premium same for take-out and café
drink
1 January 2015The Undercover Economist
Chapter-27
Super market’s Art : Price Targeting
Supermarket Target
At Shoppers who are indifferent At Shoppers who have
to Prices a sharper eye for a
bargain
Example : 1) M&S
2) Sainsbury
1 January 2015The Undercover Economist
Chapter-28
Supermarket really Expensive?
Organic Conventional
Expensive Less Expensive than wholefood – Standard Pricing
Advice: Shop Cheaply ! Don’t try to find
a cheap store!
1 January 2015The Undercover Economist
Chapter-29
Common Strategy : Sale-Pricing
Super-market Sales effective form of Self-targeting
1. Loyal Customers
2. Bargain hunters
What they do?
Shops jump Between high extreme and Low extreme of price
but not in the middle –They always mix it up!
1 January 2015The Undercover Economist
Chapter-210
Price-targeting
Price targeting may refer to:
Price discrimination, in which a good or service
is sold at different prices to different consumers
Price point, a model of pricing
A mechanism in monetary policy;
1 January 2015The Undercover Economist
Chapter-211
When price-targeting is good
PillCorp pharmaceutical
Global pricing to exactly balance loss of margin.
High price-
• Rich- no point of losing cost
• Poor- dying- greed
Dual-Pricing policy
A Win- Win situation
1 January 2015The Undercover Economist
Chapter-212
When price targeting is bad
TrainCorp, a passenger train company
Price
High price- commuters, business man
low price- students, senior citizens
Group pricing strategy is inefficient
1 January 2015The Undercover Economist
Chapter-213
Conclusion
Pricing should be profitable, efficient and fair.
Understanding customers – efficient sales
Private greed will serve the public interest.
