Marketing Price Setting in the Business World

Marketing

Price setting in the business world is essential to success, because price strikes the balance between the competitiveness of the product in the marketplace and the ability of the company to cover the costs of providing the good or service. Thus, price setting has two dimensions. From a market competitive standpoint, the price defines the positioning of the product within the marketplace. A good example can be found with major sports apparel brands (e.g. Nike, Adidas) or sunglasses. Most of these goods are produced at a cost that it not much more than what the cheaper varieties cost. Yet the price to the consumer is substantially higher. The reason is that these companies are seeking to define their product as markedly superior to the generic brands on the market. It might only cost another five or ten dollars to produce a good that is superior, but the price point needs to reflect that superiority in a way that conveys a certain degree of exclusivity.

At the lower end, firms compete based on having the lowest price. The price set, however, has to provide sufficient volume sales and contribution margin that the company can cover its fixed costs. Thus, price setting is both a competitive strategy and an operational strategy. The way a company balances these two variables will determine its success in the market.

2.

As the price example illustrates, marketing is linked with other functional areas. Production is one of them, but so too can research and development, and support functions as well. Marketing in particular needs to take into account production and development costs. These components of the company cannot exist on their own. The strategy instead must be formed by the different components of the company working together. Thus, senior management needs to craft strategy, and define how marketing and the other functional areas of the company will work together to execute this strategy. Nike, for example, will have marketing ensure that it can charge premium prices for its goods, in such a way that profit margins are high, but production also has to ensure that the quality is such that consumers can justify paying that premium

EuroDisney

1.

There were a number of factors that contributed to EuroDisney's poor performance in the first year of its operation. There were external factors, such as cheap flights to America and the attractiveness of other competitive options like the Barcelona Olympics. These drew customers away from EuroDisney. However, most of the problems were internal. The project was met with controversy from the outside, and several decisions that management made led to the idea that EuroDisney is cultural imperialism. The failure to understand the European vacation market -- from the breakfast issues to the month-long August vacation issues -- all contributed to negative publicity that held back the number of visits and the average ticket. In addition, Disney's marketing campaign was weak, emphasizing the size and flash of the place but not the attributes that would actually attract Europeans.

2.

I believe that these factors were largely foreseeable. The Olympics were obviously scheduled years before. The internal factors were mostly foreseeable as well. These factors arose because Disney, in particular the parent company, did not properly research the European market. It made a lot of assumptions about how it could operate in Europe, and failed to properly take into account how Europeans like to vacation, what they like to eat and drink, and myriad other factors. If the company had undertaken a better attempt to understand European cultures, it could have avoided most if not all of these mistakes.

3.

Ethnocentrism played a significant role in EuroDisney's struggles. Disney basically built an American theme park, and then marketed it to Europeans as if they were Americans. Thus, the marketing did not speak to the European audience. Further, the company made assumptions about things like breakfast -- a continental breakfast in America is different than what people in Europe actually eat for breakfast, especially when they are on vacation.