Product and pricing Essay
Nowadays, price-related promotion is a common topic in many markets. In addition, price-related promotions have been criticized in many published business literatures. In this essay, it will identify the range for reasons that price-related promotions might be used, why the firms spend budget on price-related promotions? In addition, if there are some good reasons of using price-related promotions, how it fulfills the objectives and what are the benefits of the price-related promotions?
According to White (2002) the reasons of price-related promotion need to be considered as the purposes of the firms. The main reasons are to accelerate the distribution of quantity of the products, to attract new customers for the brands, to increase the awareness of the firms' brands, and to encourage the loyalty of the exiting customers of the brands.
Price-related promotion does not fulfill well on all the objectives which mentioned above, however it works well for some of them. There are some literatures points that the price-related promotion has not long-term effect for the brand maintenance. According to Ehrenberg, Hammond & Goodhardt (1994) state, price-related promotions have not after-affect on brand's subsequent sales or brand loyalty. It is because almost of the buyers, who buy the brand on promotions, are the brand's long-term or loyal customers. It only few new customers are attracted by the promotion. Moreover, Ehrenberg, Hammond & Goodhardt (1994), Ehrenberg & Scriven (1997) point out that management practices incline to be more reduced, instead of increased spending on price-related promotions.
For the objective to attract new customers, price-related promotion is not so powerful. However, the achievement of price-related promotion on other objectives should not be ignored. According to White (2002) "price promotion will not attract new buyers to a brand, but can increases short-term purchases by some the br