Product Pricing
The cost of an "everyday low price" toy: $19.95. The cost of a Rolex watch: $2,465. A great paper explaining why corporations put these prices on products: priceless. Wal-Mart has become the leader in "everyday low price" pricing, and the number one retailer has brought many businesses to their demise because of their pricing strategy. Recently, Wal-Mart has expanded their sales niche to the toy department putting many specialty toy stores near or completely out of business. This paper will discuss how Wal-Mart priced their line of toys, why Wal-Mart used toys as "loss leaders" to attract customers, and two alternate methods of pricing marketers can use based on demand and reputation.
Toy Pricing
Pricing is an important aspect of every business. Chief Financial Officer's (CFO) use pricing to create financial projections, establish a break-even point, and calculate profit and loss margins (Power Point, 2005). It is the only element in the marketing mix that produces revenue. Price is also one of the most flexible elements of the marketing mix as it can be changed very quickly. This is usually done to beat competitor prices in an attempt to fix the product's market value position very low (Anderson & Bailey, 1998). After all, high prices make it difficult to become the market share leader. The leading US retailer, Wal-Mart, is an expert at low product pricing as evident in 2004 with $250 billion dollars in sales to their 138 million weekly shoppers. However, they are also responsible for reducing prices so low that it drives specialty stores out of business. This is the effect Wal-mart has had on ma ...