1) Which of the different product mix pricing strategies discussed in the text applies best to PayLess’s new strategy
My guess is that they are using market-skimming pricing. I think this because they have probably invested a huge amount of money into this rebranding effort, and of course, this needs to be recouped. Hiring the new designers, remodeling the stores, manufacture and shipping of new merchandise had to have taken a nice bite out of PayLess’s pockets. I think the strategy is captured in the psychological pricing question below. My thought is that even if payless liquidates its entire inventory and recoups every dime it invested, there would be an about of folks that will reject the change if the pricing were to stay the same
2) How do concepts such as psychological pricing and reference pricing apply to PayLess's strategy? In what ways does PayLess’s strategy deviate from these concepts?
I recall a tuna commercial a few decades back that had a cartoon character that was a fish (tuna) that kept trying to impress the Starkist company he had “good taste” (as in class) by doing ridiculous things like playing polo, learning French, or wearing a monocle and an ascot. His failed attempts at culture ended with a disapproving “Sorry Charlie, we want tuna that tastes good, not tuna with good taste”. I read this as we often associate quality with a higher price, and in most cases you’d be correct in assuming this. Looking at the previous payless “image”, they were known for cheap shoes. Cheap has 2 flavors; Inexpensive and low quality. The two are completely different yet often become interchangeable. If Payless continued to keep the same price structure and selection after its makeover, they run the risk of being perceived as simply putting a “new coat of paint” on the same old store. I also see a “symbiotic” relationship between this new rebranded payless and the brand names mentioned in the... [continues]
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