Why Marketing Students Need to Understand Pricing Theories
How understanding pricing theories will prepare students for the workforce.
Not so long ago, marketing was simply considered as the tactics to sell a product or service—usually consisting of advertisements. These advertisements too were pretty basic in nature, and not creative to say the least. Over the course of the years, the competition has gotten significantly intense. With numerous substitutes and variants available for a mere basic good, it has become extremely essential that the traditional norms of marketing are changed, and the domain is extended to unexplored areas to gain a competitive advantage over rival firms. Marketing as a major for education has been there for quite some time, however with research and every day deviation from hypothesis, the curricula keep changing. This dynamic nature is there for all the right reasons. What previously may have been simple, convincing techniques, marketers of tomorrow are taught beyond these conventional methods. It is realized that marketing is an essential part of strategizing, and therefore the actions need to be accounted for. One such strategy is that of pricing theories.
How can price theories be taught to future marketers?
Consumers are well aware of their surroundings nowadays, and they put Ricardo’s theory to use by being rational beings—meaning they make the best choice for themselves. Prices play a huge role in determining the sales of a particular product or service. With that in mind, prices need to be adequate so that an organization’s profitability does not get impacted, but at the same time it should be reasonable enough to keep a sufficient demand intact compared to its competitors. Since we have established the need to teach this determinant, here are some ways that can be proven fruitful. Case studies and their analyses are one of the most common ways to teach such matters—that is primarily because they have proven to be more relevant to the situations since most of them are factual. However, most importantly, case studies stimulate the thinking ability of the reader. Once the theories have been explained, it becomes more suitable to apply them in such a scenario.
To break this down into a real-life experience: think of Tesla, the auto manufacturer. Their first cars they released were quite expensive (over $70,000 for one car). Their technology was revolutionary, and consumers couldn’t get enough of it. I, myself, have dreamt of buying a Tesla many a time. However, I can’t afford a $70,000 car. Elon Musk and Tesla created their own version of disparity by pricing the vehicle so high. Once sales picked up and consumers showed that they were okay with the concept of paying large amounts of money for the car, Tesla released a more affordable version at half the cost. Suddenly, a large portion of the market could afford a Tesla vehicle, and the cars were sold out before they were ever produced. This is a great example of pricing strategy, because you can see exactly how things played out for the company, and how it helped to shape their brand perception in the market.
Real life experience
It is highly recommended that marketing students are made to intern or assist with ongoing projects relevant to pricing strategies, so that they get a first-hand view of the situation and make adequate judgments. In the world of digitalization and technology, it would be absurd to simply rely on manpower to perform tasks. Softwares are designed to improve the efficiency of a task, and for this very reason, CPQ Software is in place to aid the companies in configuring complex quotes and prices in real-time for adequate decision making. Various softwares are available that can help perform this task as per the company’s needs. It is pertinent that the institute teaches their marketing students about a few of these softwares otherwise their survival will be difficult, since nowadays companies are heavily reliant on technology. Institutions also need to make sure that simply teaching the functioning of these softwares is not enough; modeling lab sessions need to be carried out so that proper analysis of the results and data are also taught.
It is important to read and learn what the book and theory say. However, that can only teach you to a certain extent. With disciplines like marketing, it is essential that a practical aspect is also included in teaching methodologies.