Ch. 17

As more frozen dinners “go natural”, prices will naturally adjust in the face of competition. Though the availability of alternatives has great influence on prices, so does the distribution strategy. Consumers will often pay higher prices for convenience and accessibility. Amy’s Kitchen has a huge distribution network from super centers like Wal-mart to college campus convenience stores (where they are in great demand).

Consumers may also be more apt to accept higher prices when they are amongst other similar prices, like in a high priced market or when sharing a shelf next to an expensive line of products. Shoppers may be more prone to spending a few extra cents or even dollars on a product after investing 20 minutes in an expensive market than they would if they were to assess a product individually.

Manufacturers have lost much control within the distribution channels, however, giving wholesalers and retailers the power to adjust prices to suit the purpose of the retail outlet. For example, they may raise prices of brand names in order to increase the sales of their store brand products. This can be avoided, in part, by sticking with one distribution system, avoiding “price-cutting discounters” or even printing the price on the package (which may not be an acceptable image).

Product loyalty is by far the most powerful piece of the pricing puzzle. When customers are loyal demand becomes more inelastic. Even a moderate increase in price will not deter a loyal customer (at least in the short run) as long as they remain completely satisfied with the product or service that they are purchasing.