Download Economics in Daily Life----Consumer Surplus and Sales Strategies

Economics in Daily Life----Consumer
Surplus and Sales Strategies
Consumer Surplus (CS)
 An economic measure of consumer satisfaction
 Difference between what consumers are willing to
pay for a good or service relative to its market
price
CS occurs when……
consumers are willing to pay more for a given good
than the current market price
CS is actually……
the psychological feeling but not the actual
payment to consumers
 This concept was introduced by Alfred Marshall, a British
economist
 Introduced to remind how the
producers latch on consumers
 Producers usually provide
discounts to attract the consumers
The more the CS that can be provided to consumers,
the more they want to buy.
Sales Strategy---Psychological Pricing

Based on the theory that certain prices have a
psychological impact

Retail prices are often expressed
as “odd prices ”

Consumers tend to perceive odd prices
as being significantly lower than they actually are
Tending round to the next lowest monetary unit
?
Sales Strategy---Price Skimming
 A pricing strategy in which a seller sets a relatively high price
for a product or service at first , then lowers the price over
time
 To recover its sunk costs quickly before competition steps in
and lowers the market price
Sales Strategy---Price Skimming
Examples:
• new models of smart phones,
• new sport shoes
Sales Strategy---Tie-in-Sale
 A marketing arrangement in which a supplier of
an in-demand good or service sells it on the basis
that the buyers also buy a certain amount of
another products
Sales Strategy---Tie-in-Sale
Example:
• Games given along with the game
consoles consumer purchased
Sales Strategy---Penetration pricing
 A marketing strategy used by firms to attract customers to a
new product or service
 Practice of offering a low price for a new product or service
during its initial offering
Attract customers away from competitors
Sales Strategy---Penetration pricing
Reason why this strategy is adopted……
• Customers will buy and become aware of the new product due to its
lower price in the marketplace relative to its rivals
• Firm can have a larger market share and thus can expand its scale
Conclusion
Consumer Surplus (CS)
•MENTAL SATISFACTION of consumers only
•DOES NOT equal to the actual gain
Sale Strategies
• sellers will apply different sale strategies in order to capture a part
of consumer surplus
We should consider the actual value of the products
before the purchase instead of buying on impulse or
simply attracted by the discounts provided !!!