Advance Marketing

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Unit 6 DB
Contemplate whether prices should reflect the value the customers are willing to pay or whether they should be based upon the cost of the product or service to the company. Bring in a product or service example to support and provide clarity on your position.
 
Prices should reflect the value that customers are willing to pay, rather than the cost of the product or service. This is because such a pricing system provides companies with the incentive to innovate, is more reflective of marketing impact, allows for the creation of premium products, and accounts for brand value of the relevant product or service. The example that will be used for discussion is the iPhone.
Foremost, if the prices reflect the cost of the production for the product or service alone, then the prices may not reflect the cost of innovation, research and development and branding for the product or service, or the reward to the company for creating an innovative product that is widely demanded by consumers. For example, in the case of the iPhone, the cost of production is typically a small fraction of the overall retail cost, because the retail cost reflects the innovation, design and technology that is embodied in the product, independent of the production cost. If products and services are priced at cost of production, then innovative companies which invest more in research, branding and innovation will always be loss-making, and thus, there will be less innovative products in the market.
Secondly, prices should reflect the value that customers are willing to pay because that would reflect the impact of marketing to the company. If prices were kept low at the cost of production, then it would be difficult for the company to know whether product or service demand was a result of genuine consumer demand due to effective marketing and product quality, or because the product is simply cheap.
Thirdly, pricing products at the price consumers value, rather than the cost of production, allows for the creation of premium products. As emerging markets such as Indonesia and China see a burgeoning middle class, these middle class consumers are increasingly demanding premium products which are reflective of their lifestyles and aspirations. As a result, pricing products and services, such as skincare pharmaceuticals and digital devices, at the price that these consumers value rather than the cost of production allows for these products to come with a premium status that fulfils the aspirations of these middle class consumers. Conversely, if a product is priced too cheaply at the cost of production, the premium branding of such products will be diluted. In the case of the iPhone, the high price tag of the product contributes directly to its branding as a status symbol and luxury item, given that consumers value it at that price as a symbol of their trendiness and taste.
Finally, pricing at the price that consumers value allows for the brand value of the product or service to be captured fully. Brands are often intangible concepts, perceptions and notions surrounding a product or service, such as durability for Dyson or elegance for the iPhone, which can be translated into a higher monetary value to the consumer. As a result, products and services should be retailed at the price that consumers value in order to capture the full value of the brand and its intangible qualities. Unit 6 Assignment
Amazon Case Study
Unit 6 Assignment
Amazon Case Study
This essay will be based on the Amazon case study, which discusses the Amazon business model, its strengths and weaknesses. Amazon is a global online retailer and e-commerce company which offers low prices, strong customer service, effective delivery options and a diversified range of products across most consumer categories. This essay will discuss why Amazon's distribution has succeeded while many others failed, evaluate the nature of Amazon's pricing model relative to their competitors, elaborate on how Amazon used differentiation and positioning to maintain a competitive advantage, and suggest new growth strategies for Amazon in a changing macro and micro environment. 
Foremost, Amazon's distribution model works because the company chose to keep its supply chain and distribution in-house, and was able to scale effectively to reap the benefits of an integrated supply chain. (Chiles and Dau, 2005) Amazon chose to keep its supply chain in-house, investing heavily in order picking, warehousing, delivery fulfilment and transportation infrastructure to ensure that it could control the quality and capacity of its distribution model. Amazon also integrated its supply chain to retain full control over distribution operations from start to end. This set it apart from global competitors such as Alibaba and Lazada, who relied on third party logistics providers which often failed to meet the scale or dynamism of demand in these companies. Amazon also leveraged big data to predict consumer demand ahead of supply, in order to match supply and demand more precisely. Finally, Amazon built a platform of strong suppliers and customers through initiatives such as the Associates program, which gave supplier affiliates  preferential treatment in referring customers to Amazon's stores, or the Amazon Prime system, which offered unlimited free express shipping for a low annual price of $99. (Schiborr, 2016) This allowed Amazon to build a robust platform matching suppliers and customers to drive a scalable distribution model that could reap the benefits of economies of scale, such as cost savings. (Schiborr, 2016)
Amazon's pricing model is a dynamic pricing model that leverages big data, data analytics and a larger supplier and customer base. Amazon aggregates prices set by its suppliers, and then ranks them according to quality and relevance in addition to price for its consumers. This allows Amazon's pricing model to stay responsive to market conditions. Furthermore, Amazon's pricing model leverages Amazon's effective supply chain capabilities and economies of scale to offer the lowest prices on the market to customers, which is a strategy known as 'cost competition'.
  Amazon has used differentiation and positioning as two key components in maintaining a competitive advantage. Foremost, Amazon has successfully differentiated itself through its wide range of products, low prices and superior customer service. Amazon offers a wide range of consumer products in categories such as household, educational and food, which outstrips the range offered by close competitors such as Walmart and Walgreen's. Amazon is also able to offer the lowest prices in the market, due to its superior supply chain capabilities and its large base of suppliers and customers. (Mellahi and Johnson, 2000) The savings from its supply chain system and the economies of scale reaped from its network of suppliers and customers go directly toward the offering of lower prices for its customers. Finally, Amazon offers superior customer service. Customers are able to choose between different delivery timeframes to meet their needs, and are offered a 30-day money-back guarantee in the event that they are dissatisfied. Furthermore, Amazon invested heavily in a  dedicated customer support team to ensure that the needs of its customers are adequately met. Finally, Amazon provides personalised customer recommendations to its customers, based on their past browsing, shopping and demographic history.
In terms of positioning, Amazon initially positioned itself as a low-cost, high-variety online book seller, which allowed it to carve an effective niche in the then-nascent e-commerce market. ( Currently, Amazon has positioned itself as a low-cost, high-variety, customer-centric and personalized seller of various types of consumer products, which continues to distinguish it against rivals such as Walgreen's and Walmart. Amazon's position has also allowed the company to retain a strong base of loyal customers to fuel its continued growth and expansion. Finally, Amazon's positioning as a personalized seller, driven by its algorithmic recommendation engines, allow it to provide targeted recommendations to customers in order to boost its sales.
The macro and micro environment is changing, and Amazon should keep up with such trends in order to continue growing sustainably. Macro trends include a growth in the global consumer expenditure share of emerging markets, and micro trends include a growing focus on brand awareness, increasing customer expectations, and a trend towards mobile purchasing. Foremost, the global consumer expenditure share of emerging markets such as India and China is rising, which should prompt Amazon to consider how to adapt its distribution and marketing models to fit the specific cultural contexts of these countries. Secondly, customers are increasingly focused on brand awareness, and are increasingly buying directly from branded stores which offer seamless, personalised customer experiences, rather than the impersonal, minimalistic storefront that Amazon offers. Amazon should thus consider how to set up dedicated storefronts for third-party brands, in the same way that other e-commerce rivals such as T-Mall have done. Thirdly, customers are increasing their expectations of delivery and order fulfilment times, and are increasingly expecting a wider range of products available to them. Amazon must therefore continue to invest heavily in procurement and supply chain capabilities to stay ahead of rivals. Finally, Amazon should leverage a trend towards more consumers buying products on their mobile platforms, by investing in improving the mobile experience and mobile payments systems for consumers. 
Amazon remains poised for strong growth and dominance in the global e-commerce market, given its integrated, in-house distribution model, its dynamic and low-cost pricing model, and its differentiated value proposition of low cost, wide variety, efficiently delivered and personalised products. However, Amazon needs to remain mindful of global trends in order to continue to succeed.
Chiles, C. R., & Dau, M. T. (2005). An analysis of current supply chain best practices in the retail industry with case studies of Wal-Mart and Amazon. com (Doctoral dissertation, Massachusetts Institute of Technology). 
 
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e. commerce? The case of Amazon. com. Management Decision, 38(7), 445-452.  
Schiborr, L. A. (2016). How to emerge as a digital platform leader?: Envelopment and business model innovation at eBay and Amazon (2006-2011) (Bachelor's thesis, University of Twente).

Category:	Other
Offered Price:	$50.00
Due Date:	8 November 2019, 12:11
Added:	30 October 2019, 15:21
Assigned To:	Oxfordtutor

Price:	50.00
Added:	7 November 2019, 20:05
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