Applying the Concepts

Do a pricing survey of several petrol stations in your town in different locations, ff possible, check prices at the following: stations at a service area on a main road/motorway, stations on a local street in or near the town, a station not near any other stations, and (where appropriate) a station that is tied to a supermarket. Write down the brand of petrol, prices of regular and premium grades, type of location, distance to the nearest competitor and the competitor's prices.

* Is there a pattern to the pricing of petrol at various forecourts?

• Arc these stations using cost-based, buyer-based or going-rate pricing?

2. You are faced with setting the price for an automatic oar wash. Your annual fixed costs are £50,000 and variable costs are £0.50 per vehicle washed. You think customers would be willing to pay £2.50 to have their ear washed. What would be the break-even volume at that price? What opportunities are there for pricing high? What might be the most significant constraints on your pricing decision?


Allan Ruddock and Ivan Fallon, 'Blood begins to flow in the battle for the Independent?, Sunday Times (6 February 1994), pp. 3, 6; 'Newspapers- indirubber', T/ic Economist (29 January 1994), pp. 3,1-4; 'Cheaper rimes here to stay', The European (10-16 June 1994), p. 22; Andreas Whittam Smith, 'An ugly struggle for dominance uf the newspaper market', Itidejiendent (24 June 1994), p. 1; Roger Cowe, Tony May and Andrew Gulf. Telegraph in shares inquiry', Guardian (24 June 1994), p. 1; Tony Jackson, 'Ruthless killers or paper tigers', Financial Times (2-3 July 1994), p. 9; 'Scale of Indie's cut .surprises ad industry'. Marketing Week (5 August 1994), p 14; Raymond Snoddy, 'Undaunted by lilt to newspaper profits', Financial Times (26 August 1994), p. 15.

See David J. Schwartz, Marketing Today: A baste approach, 3rd s;dn (New York: llarcourt Brace Jovanovieh, 1081), pp. 270-3.

For an excellent discussion of factors affecting pricing decisions, see Thomas T. Nagle and Reed K. Holden, The Strategy find Tactics af Pricing. 2nd edn (Englewood Cliffs, NJ; Prentice Hall, 1995), ch. 1.

Michiyo Makamoto, 'Weak Japanese recovery hits results at steelmakers', Financial Times (14 November 1994), p 21; Andrew Baxter, 'Sweet and sour flow from British Steel', Financial Times (14 November 1994), p. 19. Norton Patey, 'Fancy footwork', Sales and Marketing Management (July 1994), pp. 41-2. Helen Slingsby, 'Discounters lose at their own game', Marketing Week (23 September 1994), pp. 21-2; Neil Buckley. 'Sainsbury launch price war campaign', Financial

7. "A funny smell from the .soent counter', Independent (12 November 1993), p. 17,

8. Christopher Farrell, 'Stuck! How companies cope when they can't raise prices", Business Week (15 November ]993), pp. 146-55; see also John Y. Lee, 'Use target costing u> improve your bottom line', CPA Journal (January 1994), pp. 68-71; 'The Texas computer massacre', The Kc-imnmint (2 July 1994), pp. 65-6; Robin Cooper and W. Bruce Chew, 'Control tomorrow's costs through today's designs', Harvard BUSUKSS Review (January-February, 1996), pp. 88-98.

9. Brian Dumaine,'Closing the innovation gap', Fortune (2 December 1991), pp. 56-62.

10. Alice Rawsthoiri, 'Discord over online music royalties', Financial 'limes (21 January 199S), p. 4.

11. Here accumulated production is drawn on a semi-log scale, NO that equal distances represent the same percentage increase in output.

12. 'Japan's chip makers: falling off the learning curve". The Economist (23 February 1991), pp. 84-5.

13. For a view of how managers perceive these price response curves, see A. Diamantopoulos and Brian P. Mathews, 'Managerial perceptions of the demand curve: evidence from multlproduct firms', European Journal < >fMarketing, 27.9 (199.1), pp. 5-18.

14. Paul A. lluntington, 'Perception of product quality in a static state utility model', European Journal o_fMarketing, 24, 3 (1990), pp. 57-71.

15. Nagle and HoUlen, Strategy and Tactics of Pricing, op. cit., ch. 4.

16. Tim Burr. "Yorkshire Chemicals ahead 19%'. Financial Times (3 August 1994), p. 20.

17. For an operable example of this, see Kai Kri.sten.sdii and Hans Jorn Juhl, 'Pricing and correspondence to market conditions: some Danish evidence', European Jnumal qfMarketing, 24, 5 (1989), pp. 50-5

18. Values taken from 'Energy-saving light bulbs', Which? (May 1993), pp. 8-10.

19. Graham Rowley, 'Aircraft prices down a fifth, says Dasa', Firumaial Times (21 January 1998), p. 27.

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