Pd Notes

1. You are considering purchasing a personal computer. What factors would affect your price sensitivity in making the decision? How would those same factors affect the price sensitivity of some personal computer buyers differently?

Some of the factors that affect price sensitivity is brand name, quality of product, features and attributes, warranty and guarantee as well as customer service offered by company, etc. These factors can affect price sensitivity of other buyers in a different manner. For example, brand may not appeal in the same manner to everyone. A brand conscious buyer will be heavily affected by product's brand whereas a buyer who is more focused on technology will be less conscious by brand name of the product.

2. What can a company do to decrease its customer's price sensitivity? Would all of the customers be likely to react in the same way?

They can reduce customer's price sensitivity by clearly highlighting the superior quality, unique product or service attributes and value proposition to customers via the marketing campaign. All the customers may not behave in the same manner because value proposition for one customer varies from another's value proposition or in other words, purchase criteria for one customers is different from another customer.

3. Many local rental car agencies rent late model cars at substantially lower prices than national companies such as Hertz or Avis. Despite their higher prices, the national companies still retain most of the market. Explain why most renters patronize the national car rental companies despite their higher prices. How have the national companies encouraged this price insensitivity?

National car rental companies are preferred due to their better quality of service, professionalism and reliability and better network. National companies encouraged this price insensitivity by positioning them in a better manner as compared to other players via superior marketing, promotion and communications strategy. They have backed this marketing strategy with quality service to customers.

4. A company can gain a substantial market share advantage with lower prices in a price sensitive market. Why then would any company in such a market choose to price cooperatively?

This is to ensure that a price war does not start in the marketplace, thereby hurting all players and benefitting the customers only in terms of low pricing. Cooperation is necessary to ensure a minimum profit margin for all players.

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