Discussion questions related to Amazon product life cycle

1. Explain the pricing issues that concern marketers.

The largest pricing issue that impacts marketers is related to competition. If marketers are marketing a product that can be easily copied or replicated, competitors can enter the market at a lower price to take market share. If this occurs, marketers must be able to position the value proposition of the product without consideration of price. Here, marketers must emphasize other features that justify the higher price point or that allows the product to simply maintain its price point. Luxury goods are typically able to do this by positioning the product as a exclusive, high-end, quality product. This ultimately allows the company to mitigate pricing pressure as consumers are attracted to the product due to its high price and exclusivity.

2. Explain how price serves as a cue to quality.

Price serves as a que for quality as higher priced products are often perceived as being higher quality. The truthfulness of the above statement doesn’t matter as much as the perception of price and quality. Marketers have masterfully occupied a niche within the consumers mindset that equate higher price with higher quality. As a result, goods that are mediocre but are sold at a high price often can command the “Premium” label when in actuality that are standard products. This occurs in alcoholic beverage industry where high-quality packaging, placement on shelves, and price point tend to point to premium product. However, many of these products are using marketing gimmicks to deceive the purchasing public into believing their products are premium. In actuality there is occasionally very little difference.

3. Describe and discuss referent pricing.

Referent pricing is best summarized as the price consumers expect to pay for a certain good or service. Here, consumers often review competitor pricing, online reviews, and past sales events to determine the value of the product. Consumers use this information as a basis to determine if a product is a good “value” or not. Referent pricing is typically used for high volume purchases that are often routine and low cost in nature. The internet has heavily contributed to priced discovery and referent pricing (Abel, 1978).

4. Explain segmentation pricing.

Segmentation pricing is charging different prices for very similar products. This occurs heavily in the entertainment, travel, tourism, and restaurant industries. Here supply and demand can allow companies to charge different prices for the same product. For example, concerts charge different prices based on seating for the same product. Seats that are closer often demand higher prices that seats that are further away. Restaurants often use coupons or daily specials to charge consumers different prices. Movie theaters and newspaper subscriptions have student and military discounts that all certain consumers to utilize the same product at different price points within the ecosystem (Anderson, 2003).

5. Explain the difference between skimming and pricing for market penetration.

Skimming is where pricing is intentional set to active the highest possible profit from the sale of the product. Penetration pricing is lowering to the cost in order to increase user adoption and usage of the product. Skimming occurs with exclusive Nike shoes as they target consumers willing to pay upwards of $300 for a rare pair of shoes. Skimming occurs with Netflix as they are willing to charge lower prices in order to get consumers to enter their ecosystem and become hooked on their content. Then the company steadily increases prices over time.

6. Product Life Cycle - identify where the company's products are relative to the life cycle. (the company is Amazon)

The company’s product is relatively mature as it relates to the product life cycle. Here, Amazon already has an extremely large market share as it relates to online internet commerce. Few companies are able to compete as they lack the product assortment, availability and convenience that Amazon offers. In addition, its cloud computing business is very dominate with a large captive consumer base that is difficult to erode by competitors. Amazon now must utilize its data to further curate products and provide delivery options that exceed customer expectations. Amazon is currently experimenting with next day delivery as it investing heavily in a logistics network to rival that of UPS and FedEx. In addition, the company has continued to make further investments in cloud computing in order to attack more companies to its platform. The company already benefits from very strong network effects as it relates to its overall ecosystem. Many merchants use it system to sale goods online, likewise many consumers use the platform to make routine purchases. Innovations such as the Kindle and Alexa have allowed the Amazon to further entrench itself into households. This has allowed the company to leverage data to allow the company to use artificial intelligence and predictive analytics. From a product lifecycle perspective, the company is now better able to innovate and create new products that consumers may not be aware that they need. In addition, with improved data, and data analytics, Amazon can expand the product lifecycle of existing products making them more comprehensive and viable to consumers.