Small villages have a newly opened supermarket. It attracts curious villagers who want a different buying experience. Supermarket have varied of goods and large quantities which took away a lot of guests from small shops. If a person wants to cook a meal, he need to go to several shops to buy favorite vegetables, meat and fruits. He will choose supermarket for convenience. In the past, small shops pay more attention to communicating with customers. People go to the butcher shop to learn different cooking methods. People go to a vegetable store and know how to male salad. Supermarkets are more likely to offer choices than to communicate, especially when it comes to self-checkout.
The price skimming strategy helps the butcher shop to boost sales in a short time. (Tanner and Raymond, 2010, p. 226) If butcher want to win the supermarket, the butcher shop must have identified advantage. The butcher shop can buy some high-quality mat. For example, beef with snow texture or homemade sausages which do not contain nitrites and other additives. The meat of the supermarket is not cut and handles professionally. This meat tastes are not as good as butcher meat. New products and new services should use high prices to recover costs. The butcher shop can offer a certain amount of meat to give the appropriate seasoning and ingredients as present. For example, peppercorns, rosemary, cumin. A variety of meat cooking methods are printed on the window to facilitate the purchase of food. Butcher can even roll out a steak, a sausage, a burger service in shop. From then on, the customer had another reason to go to the butcher shop to buy meat. Imagine a customer who is hungry after work and buys a soft, juicy burger at the butcher’s shop. By the way the customer bought some meat for a big meal for her kids at the weekend. Customizing high prices for new products and services before supermarket are imitated can quickly recoup costs. Butcher shop also become synonymous with high quality. Many restaurants will be willing to cooperate with the butcher shop.
Another pricing is market penetration pricing. (Tanner and Raymond, 2010, p. 226) In the supermarket powerful market share, small shops will take low prices to save customers. The supply channels of supermarkets can win them lower pricing space. In the fierce market competition, the blind reduction of price can lead to vicious competition, which ultimately leads to both defeats. It is repeated games. (Davis & Chang, 1986) Assume at the first time, supermarket and the butcher shop each one chooses the optimal strategy to obtain the customer, each part gain profits. Three months later the supermarket worked with the butcher shop. The butcher recommends customer go to supermarket buy cooking utensils. The supermarket encourages customers go to butcher’s shop get marbled steak. Both party achieve their desired benefits of cooperation. Half a year later, one party is violating the other side by drastically reducing the price to obtain more customer. One party made a profit, the other loss. Eight months later, both sides were loss. Finally return to cooperation. Therefore, the pricing skimming strategy is good for this scenario.
Customer behavior is an economic activity. This behavior is the purchase decision and purchase activity in the market to meet their own needs and wants. (Davis & Chang, 1986) The number and type of goods consumption that consumers buy in their daily lives is determined by different factors. The degree of consumer understanding of commodities; consumers’ disposable income; consumer preferences; commodity prices affect consumers’ willingness to buy. (Davis & Chang, 1986) If consumer need eat meat, he will buy cheap meat in the supermarket. While if he wants to eat fried rib-eye steak, he will go the butcher’s shop. According to Maslow’s hierarchy of needs, if a customer’s salary can only support his physiological needs, he won’t care about the quality and price of meat. (McMillan, 2018) Utility is the degree to which a consumer is satisfied when consuming a commodity or service. (Davis & Chang, 1986) If a customer buys meat in a supermarket but can’t find a professional to answer the question and wait too long to pay, the customer will eventually make a smelly soup. He will not be satisfied with the consumption experience. Microeconomics studies the economic behavior of individuals in the market, that is, the economic behavior of individual households, individual manufacturers and individual markets or others. The earth’s resources are divided into renewable and non-renewable resources. Everyone chooses different products because of different prices. People want to reap the greatest benefits with the least amount of spending. Suppliers want to make more products with the lowest cost to make the highest profit. Business decisions affect employees’ income.
Microeconomics studies the economic behavior of individuals in the market. It is involved in redistributing resources. (Davis & Chang, 1986) Customer choose different products because of different prices. People want to reap the greatest benefits with the least amount of spending. While suppliers want to make more products with the lowest cost to make the highest profit. Companies are cutting staff salaries to make more profits, resulting in staff has less disposable income. It effects price elasticity of demand be big. Staff will reduce unnecessary expenses. If the net profit of 1 piece of pork is $1.25, the net profit of 5 pieces of pork supply earns $6.25. 8 pieces of pork supply earns $10. Supplier would like to produce more pork. If a box of sausages is priced at $10 the quantity demanded is two people. Sausages is priced at $5, the quantity demanded is 8 people. Price elasticity will affect demand. For example, medicine is a necessity of life, and its price elasticity is small. When someone is sick, he buys medicine will not care price. More alternatives, the greater the price elasticity of demand. For example, the banana in the butcher shop can be replaced by apples, orange. When the price of apples is go up, the demand of banana may go up.Reference:Davis, J., & Chang, S. (1986). Principles
of managerial economics. Englewood Cliffs, N.J.: Prentice-Hall.Tanner, J. and Raymond, M. (2010). Principles
of Marketing. 1st ed. ebook New York: Flat World Knowledge, Inc., pp.226.
Available at: https://www.saylor.org/site/textbooks/Principles%20of%20Marketing.pdf
Accessed 17 Jan. 2018.
McMillan, R. (2018). COMM 601 Principles
of Managerial Economics. Available from Lincoln University to enrolled