Pricing Principles And Final Exam: Analysis Of Handling Merchandise Essay Samples

Executive Summary

The objective of this report is to pursue an exploration of the pricing principle of consumers’ physical handling of goods and products, as an inducement to buy more or pay more at the counter. At the outset, it is imperative to note and understand that there needs to be additional literature and research on the matter. What has complicated the scenario is the factor of digitalization of consumer behavior, despite clues that people actually prefer to shop in-person. Bushong et al. (2010) in their food product experimental study found that their subjects were willing to pay more, when confronted with a product face-to-face. The paper briefly reviews the task demands, then provides a brief overview of pricing principles and why data management in this area is so important, and the kind of information it can yield.
Proceeding further, the overall investigation of this inquiry treats the research process itself as a conduit of experiment, as it were. In other words, the hypothesis of the paper agrees that physical enticement pricing principle does influence buyers and that there are definite differences between buying things online, versus in-person shopping. The literature review provides a well-balanced perspective on pricing principles. One article notes how important this principle is to the giant soft drink manufacturer, Coca-Cola. Another on the small gift-shop venue explains how crucial product placement is so that consumers will be readily and increasingly enticed to physically handle goods, and then buy. A mini-experiment mentioned an individual’s experience when shopping for puppies. And after wrapping up with a commentary of discussion and results, the powerful conclusion saves the best for last and notes Wolf et al. (2008) ideas on the power of touch indicated that when people could touch/feel an item for a long duration, they were more inclined to pay higher – in this case – “for the mug” (p. 479). Also included were data from the National Bureau of Economic Research, and the Newspaper Association of America.

Introduction

Pricing principles and pricing management data and realities yields great opportunities to learn about an invaluably important aspect of business conduct. In terms of business activities, pricing principles correlate to several vital aspects, including areas of: (a) marketing, (b) economics, (c) consumer preferences, and a host of other properties. To set the foundation, of this hopefully cogent critique and analysis, it is imperative to define a functional definition of the concept of ‘pricing principles’ in the first place. Obviously, pricing principles deeply connects to consumer appeal and marketing in terms of utilizing data to attract buyers to purchase more goods and services – and if possible at higher prices. True to form, in the article by Susie Poppick entitled 10 Subliminal Retail Tricks You’re Probably Falling For, several different kinds of price-principles are laid out. In the handout, given as a guide for this final exam, myriad psychological schemes demonstrate the basis upon how pricing principle strategies work.
For example, the varieties of ways in which pricing principles are engineered to meet consumers present a plethora of considerations. Making you feel nostalgic, or purposely setting up salespeople to behave curtly and rudely in an upscale retail environment merely pose two ways in how pricing principles may be applied in the real world. In the course of this research investigation, it is critical to keep in mind the complexities – and often hidden – insalubrious work that marketing data employs to grab those extra dollars. The digitalization of the global economy has radically changed the game altogether. However, while online shopping is a factor it certainly has not replaced people being physically connected to merchandise, wherein shoppers may feel a great deal more comfort in browsing through aisles where they can see and touch the products.
The focus of this scholarly investigation, and experiment which proposes to conduct the formation of a unique hypothesis, involves looking at the pricing principle of how they get people to physically handle the merchandise. While it is true that the online environment propels digitalized participation of buyers, crowds of people still prefer to make their shopping decisions in a physical store. According to the research experts at the Newspaper Association of America (NAA) (2011) multiple surveys traced to the purchase decisions of individual products indicate that their “current study” at the time, was able to cover 14 categories of “women’s apparel, men’s apparel, small appliances, furniture, toys,” and more (“How America Shops,” p. 4). Trending analysis reports from this marketing venue and advertising firm, gives it abundant credibility since they are able to track both online and offline consumer choices in buying – along with valuable contingencies in demographics. Obviously, media ads and studies can provide a wealth of material to study which pricing principles work best in whichever environment one is researching.
This final exam paper looks at the pricing principle of how marketers get folks to physically handle the merchandise. When business professionals advocate this pricing tactic to obtain increased spending by consumers (and thus, profits), it becomes ever clearer that certain steps are involved. Therefore, the basic task herein is to investigate this idea as drawn from one of the ten pricing principles by gathering appropriate resources from literature-review level academic articles, doing original research, and perusing marketplace observations. The field of pricing management in business is tricky, expansive, and non-exhaustive. In other words, given the digitalization of online and mobile smartphone shopping and merchandising, wide gaps persist in the literature. Much more research is needed. For example, before explaining survey results, the NAA (2011) needed to broadly define ‘shopping’ as inclusive of “checking at stores, by mail, over the phone or on the Internet” (“How America Shops,” p. 8). Nevertheless, a literature review follows this section, trailed by sections covering: (1) Key Relevant Research Question, (2) Research Method, (3) Discussion, (4) Results, and (5) Conclusion.

Literature Review

The price theory of customer handling of merchandise directly relates to the physical product displays, and correlates to consumer purchases in reactions to product enticements (Bushong, King, Camerer, & Rangel, 2010). These physical product displays as inviting lures to compel consumer to handle merchandise are then able to be connected to statistical evidence, which points to factors that consumers are often willing to pay more for items they physically interacted with. In theory, the pricing principle of consumer handling of merchandise directly correlates to all kinds of goods, and should increase interest to buy – regardless of whether substitutions are used or not. For example, researchers reporting in the Engineering Economist journal examined and conducted a study-model which looked at substitution possibilities for products when deciding on capacity and pricing (Bish, Liu, & Suwandechochai, 2009). As an engineering research team, their findings showed key quantitative parameters for different market elements. Although they used highly technical stochastics to try and figure out pricing investment decisions, they consider real-world scenarios regarding pricing principles, which did not negate the Pavlovian concept presented by Bushong et al. (2009). Therefore these principles for measuring the price theory of consumers’ physical handling to encourage sales, connects to support the idea how consumers are provocatively enticed to handle goods.
Merchandise handling price theory may be a complicated principle to quantitatively pin down at the outset of an investigation of its structure. Although Bushong, et al. (2009) experimented with Caltech participants in a study resulting in showing a “willingness-to-pay” more by margins of 40 to 61 percent, the pricing principle of merchandise handling always reverts back to aspects and elements relating to product display. For example, the length of time consumers are exposed to items plays a role in capturing customer sales as a result of physical product interaction. From an engineering research point of view, stochastics can help to better determine what percentage product-handlers are willing to pay more for. Findings from Bish et al. (2009) provided an analysis that considered real-world pricing principles. In basing their investigation on key quantitative parameters, their study-model used a product substitution format. Nevertheless, product display elements such as attractiveness or length of time shown, are indicative as relevant aspects to merchandise handling in prompting consumers to buy.
In determining how accurate, or useful, the product handling price theory can be one may turn to known data and factors regarding shopper’s habits. To properly evaluate such statistics, both information systems methods and well-established advertising resources should be considered. Especially critical to distinguish online purchase behavior from in-person physical buying behavior of consumers, those who handle goods do not fall prey to what researchers and scholars refer to as ‘product uncertainty.’ This very important article makes the point that consumers who purchase goods online experience ‘product uncertainty’ because they cannot see/feel or physically examine merchandise, thereby working in complete opposition to the pricing principle so investigated in this paper (Hong & Pavlou, 2014). The type of items matters little as long as products can be handled – be they books, automotive goods, or candy. When attempting to discern the validity of the merchandise handling theory, or refuting its principle, both a breadth and depth of exploratory information is useful. For example, one report offers an interesting angle that indirectly suggests consumers prefer to buy things they can physically handle. One data-fueled outline and synopsis looking at how consumers searched for books on the digital platform, found they preferred to go directly to booksellers to conduct their searches, thereby suggesting at least some partiality towards buying an actual physical product (National Bureau of Economic Research, 2015). The challenge and question as pertains to this study on real-time product consumers searching for books leaves an interesting gap open for further research as connects (or correlates) to the preference of consumer handling merchandise, as a theory. As search technologies become ever complex and myriad in consumer choices, more evidence must be gathered with precision. Examining book-searching and purchases may provide the perfect vehicle to generate future studies about the pricing theory of merchandise handling. Nevertheless, one must not neglect the imperative opportunity to rely upon newspaper advertisers in considering the merchandise handling price theory. They have built generations of real-time statistical archives of buyers’ spending habits over the decades. Regardless of the new age of electronic communication, human behavior remains the same.
Think about it. You walk into an airport lounge while waiting for your connecting flight, and what do you see? Lots of stuff on shelves tempting you to pick them up. In journal article fashion, pricing point strategies are discussed solely based upon physical displays of actual merchandise (Thinking Small, 2014, p. 187). The strategy of studying human buying behavior in gift shops exclusively weighs its analysis on actual products and pricing, by giving real-life testimonies of how managers and shop owners of these tiny money-making gems arrange items on shelves to specifically attract handling and increase purchasing. In an article entitled How America Shops and Spends, a prominent newspaper association, a report of vital data and information is given. The percentage indications of real-world shopping statistics, with commentary on physical store shopping patterns can be smartly deciphered to apply any sections to the price merchandise handling theory. Declaring that “most shopping and purchasing still occurs at stores” speaks volumes in supporting evidence related to the price theory of merchandise handling (Newspaper Association of America, 2011). Also, as indicated in this report so referenced, firm evidence supports that online shoppers have not failed to shop at brick-and-mortar locations.
The depth of the pricing theory of merchandise handling can actually integrate many different kinds of product experiences. One team of researchers examine physically-sold automotive products, and discuss how the selling price is relevant to how much inventory is on display (Uthayakumar & Parvathi, 2011). They offer a numerical model, concluding that they could determine price sensitivity to inventory levels on hand. Everyone at some point in time has walked into an automotive store and picked up a neat-looking gadget or two. See how it works?
But nothing perhaps is more familiar to the buying public than interacting with the soft drink industry’s goods. A core incentive for product price planning at the Coca-Cola Company demands sales predictions be arranged on shelves in a way that beats out competitors. One article reviews and details how Coca-Cola pricing relates to merchandise on the shelves, in terms of product-display and pricing (Wailgum, 2009). Some demonstrate the hypothesis that the length of ownership increases valuations (potential pricing) because the longer people see the item physically over periods of time, more exposure positively affects bidding on an item (Wolf, Arkes, & Muhanna, 2008). While it is true, this observation and experimentation revolved around bidding, nevertheless the process of purchasing additionally influenced the way people touched and handled objects as pre-stimuli to buy. Reiterating physical space as prime-valued property, shoppers’ eyes are correlated to pricing. The length of time over which consumers see objects, repeatedly, also seems to have an important impact in connection to the pricing theory of merchandise handling.

Research Question:

The research question is as follows. Does the pricing principle of getting consumers to physically handle merchandise correlate to item display in a brick-and-mortar environment, and if so, why? The basic idea is to explore the hypothesis that the more marketers can engage consumers in a tactile, look-see-and-feel engagement with products, the more they will be likely to purchase and/or willing to pay a higher price for. A tiny real-world experiment had been very easy to conduct. An individual was asked to view puppies on a website. Later, the individual went to a pet store and browsed puppies. Very simply, the person would rather have purchased the live puppies from the brick-and-mortar store instead of via the website.

Research Method

The main research method considers the research question. The pricing principle of getting consumers to physically handle products or merchandise, as correlated to an item or actual object (or puppy, as the case may be) must be integrated into a technique. This ‘technique’ is a process. Thus, an amalgamation of the supporting evidence concerning the ‘physically-handling’ of products pricing principle stems from compiling what researchers in the literature review have found. Once each aspect of pricing principle that is befitting the analysis that product handling is a solid strategy, a discussion of how and why the phenomenon can be explained follows.

Discussion

First of all, the mini-experiment conducted with the puppies helps demonstrate a live, and real-world example about the power of handling real products, and its influence as a pricing management tool and principle. Obviously, a team of professional researchers at the doctoral level, would be required to sustain conduction of a similar full-blown ‘puppy’ experiment by utilizing a greater number of random subjects. This is clear. While it is true that the online digitalized shopping experience on the Internet is not under examination in this final exam, a brief contrast is in order to help bring clarity that highlights the situation regarding customer confidence when shopping. The idea of product uncertainty is a concern in online shopping venues. Why is this relevant as a contrast to buying products in a physical environment? Consider the following.
Despite the factor that we live in a digitized world, people still need and desire to shop for goods and services in person. According to Hong and Pavlou (2014) “product fit uncertainty” is a problem in which merchandise is returned, due to “lack of consumer satisfaction” and defeating any effective pricing strategy (p. 1). The high cost of these losses due to buyer dissatisfaction directly and inversely relates to the fact that people feel much better when they can see/feel the goods that they buy. For example, imagine a wife purchases bed linen sheets online. Then, after she receives them returns them because the fabric is sub-standard and rather poor – although the photographed image appeared fine. See the problem? If you add up a hundred or a thousand minute scenarios like this, one can easily perceive how a firm’s online division may be severely challenged, in terms of trying to figure out any kind of reasonably effective pricing principle at all.
Therefore, turning attention to a brick-and-mortar point-of-sale format product optimization and perhaps substitution might be ways to sort out, and align, optimal capacity. Just as Bish et al. (2009) suggest in figuring out investment strategies for pricing, realize that the “economic conditions, which affect consumers’ purchasing power,” also affects products, including those being considered for substitution (p. 121). In fact, according to Bish et al. (2009) both products would thrive given a strong economy, and both would sink with a weak one. In terms of displaying inventory, the seasonality of economic strength would certainly need to be accurately analyzed when pricing goods on shelves, even though customers love to buy things they can handle.
The automotive industry as a goods provider makes a prime case for illustration about inventory displayed, and pricing tactics. Most everyone has had an occasion to enter an automotive store in an in-person environment, to say pick up a fan belt, battery, or oil changing equipment. Undoubtedly, you browse around the floor peering at the new contraption-like displays yet eventually you find what you need. You pick it up, feel its weight, turn it around perhaps, and ask the salesperson what he or she thinks about it. Uthayakumar and Parvathi (2011) figured out a complex quantification that correlates to “inventory values” and “selling price,” with regard to “corresponding profit” (p. 839). The point of this strongly suggests that even though the assumption may be correct in shoppers buying more, or purchasing higher priced items that they can touch/feel handle – there is a balance showing the wisdom of utilizing strictly calculated formulas. In this manner, pricing principles applying to customer handling of merchandise displayed can be taken to the maximum level of profitability.
At this point, the discussion turns towards Coca-Cola’s display pricing, enticement of consumers to handle the products, and the concept of displayed stuff in terms of physical presence. Obviously, as a monopoly-level conglomerate selling billions of dollars-worth of soda, Coca-Cola has found ways to stay in profit. To stay ahead of the game, according to Wailgum (2009) Coca-Cola hired a director solely to focus upon shelf-space in stores, Mr. Eichman, who said product placement could “make or break the store and also the manufacturer” (p. 15). In fact, physical product placement is so critical that the gigantic bottler pays attention to shelf space in comparing statistics from the previous year, as well as realizing “shoppers eye products differently in different environments” (p. 15). If you really think about it Eichman is also right when he says that people drink for myriad reasons, not just because of thirst. Someone quickly running into a convenience store versus another shopper browsing in a Walmart are going to ‘view’ products differently. So what are the results from the intake of all the gathered research, thus far?

Results

The entire puzzle is complicated. But in the article ‘Thinking Small’ all retailers selling goods in brick-and-mortar settings must be concerned about the pricing principle of customers’ physically eye-balling goods and handling them as they browse and shop. In fact, ‘thinking small’ may be actually a case of thinking smart. Here is why. In discussing gift store merchandise, managers figure out how to place products for the best appeal. One tiny gift store manager in the Bronx, New York according to Wailgum (2009) realizes the importance of this pricing principle, stating “Another suggestion is to combine small gift items with larger pieces in a themed display” (p. 6). Bushong et al. (2010) describe the experience akin to Pavlov’s dog, which learned to salivate by anticipating events that came before. In one food experiment Bushong et al. (2010) observed how smell drove people to choose certain foods. The researchers Bushong et al. (2010) explained, that the most impactful shopping occurred when products were “in front of a subject” (p. 1568). Real-time coupled with real products, therefore, seem to drive their concept that when merchandise is displayed, physical appearance can actually induce consumers’ willingness to pay more.

Conclusion & Recommendations

One definitive research study showed that products when handled for longer lengths of time, yielded willingness to pay more. Wolf et al. (2008) found that participants “duration of physical examination” of a product reflected a “willingness” to pay higher prices for – in their case – a mug (p. 479). A National Bureau of Economic Research substantiated that even when people searched digitally for books, over the Internet, they preferred to go directly to bookstores “at retailer sites” or “closed systems” platforms like Kindle or Nook (“Searching for physical and digital media”). This seems to suggest that people at least want the option of physical presentation of goods, and at most want to buy things in-person. At the end of the day one cannot argue with the data. One reputable source states “Brick and mortar stores continue to have a big lead over online shopping venues but the gap is narrowing” (“How America Shops”). This observer would posit that the gap may be narrowing, but perhaps it is only narrowing because consumers are given less choice to shop in-person because so many retailers are switching to the online style. And the same report indicates that the ‘great majority’ who shop via the Internet also shop at traditional brick-and-mortar stores.
Keenly regard the following, in terms of recommendations. People like to engage their human qualities and senses, which helps explain how and why their physical handling of products is a driver correlating to merchandise display and couples with the pricing principle presented herein. As marketers and businesses figure out ways to entice shoppers to handle goods on display, they are surely on the road to increasing better and effective profitability in pricing decisions. The power of retail parties to determine greater outcomes in consumer product attraction, enticement, and sales should be stimulated by what was learned as a result of how meticulous the ‘gift-shop’ industry strives to best product placement. In other words, use thoughtful creativity to align physical products on shelves in an enticing way that caters to your target industry’s audience. It matters little whether the act allows for consumer handling of merchandise of automotive products, computer hardware, or sparkly knick-knacks in a travel-stop gift shop. Expansion of revenues depends upon the effort to propel efforts to best arrange products on shelves. Additionally, take advantage of the digitalization of the era by utilizing strategic placement of tiny mounted video stories (near key products and best-sellers) that demonstrate their uses and advantages. In this manner retail sales can be boosted, as well as conducting in-house retail consumer studies. Changing displays is also a good idea to put this particular pricing theory principle into real-life practice. Remember to learn from the advertising industrial data, as they have engaged in customer and consumer buying behavior – in terms of statistical collection – for a long time. In consideration of these key aspects of recommendation, retail members should be able to sustain and improve their understanding and application of the product pricing theory of merchandise handling.

References

Bish, E., Liu, J., & Suwandechochai, R. (2009). Optimal capacity, product substitution, linear demand models, and uncertainty. The Engineering Economist, 54(2), 109-151.
Bushong, B., King, L.M., Camerer, C.F., & Rangel, A. (2010). Pavlovian processes in consumer choice: The physical presence of a good increases willingness-to-pay. American Economic Review, 100(4), 1556-1571. doi:10.1257/aer.100.4.1556
Hong, Y., & Pavlou, P.A. (2014). Product fit uncertainty in online markets: Nature, effects, and antecedents. Information Systems Research, 25(5), 328-344. doi:10.1287/isre.2014.0520
National Bureau of Economic Research. (2015). Searching for physical and digital media: The evolution of platforms for finding books [Data file]. Retrieved from http://www.nber.org/chapters/c12989.pdf
Newspaper Association of America. (2011). How America shops & spends 2011 [Data file]. Retrieved from http://www.naa.org/docs/NewspaperMedia/data/HowAmericaShopsandSpends_2011.pdf
Thinking Small. (2014). Souvenirs, Gifts, & Novelties, 51(6), 187.
Uthayakumar, R., & Parvathi, P. (2011). Inventory model with pricing tactics for demand in auto-correlated products. International Journal of Advanced Manufacturing Technology, 52(5-8), 833-840. doi:10.1007/s00170-010-2755-7
Wailgum, T. (2009). Coca-Cola’s Retail Formula. Cio, 22(13), 15-16.
Wolf, J.R., Arkes, H.R., & Muhanna, W.A. (2008). The power of touch: An examination of the effect of duration of physical contact on the valuation of objects. Judgment and Decision Making, 3(6), 476-482.