Consumer Purchasing Power, Research Paper Example

Introduction

Buyers found a utopia of buying opportunities because of the free flow of information. Then came the internet. E-retailers found it harder and harder to stay competitive with fixed-prices methodologies and resort the dynamic pricing for trying to preserve the net profit margins. Typically the group-pricing systems will better reflect the true market value of the product involved. Spurred by dynamic pricing, online auction sites have evolved to capture those customers demanding to get the most out of the vibrant new e-commerce world an example of dynamic pricing in e-commerce today is eBay. EBay have the honor of being one of the first in the dynamic pricing, because the strategy EBay used in selling products in the auctions were realized then the strategy was particularly useful in assessing the questions of consumers’ preferences like: when the market value of a product is unclear, should the product be evaluated on the quality assurance? Were the items of scarcity value has been sold to specific set of loyal buyers or to community consumers? Were the items traded or disposed because of the quality of product, including the price of the product. Now with the internet, online auctions are equally being used for the interfaced streaming the data of products—A middle ground format, a term used in information technology that depicts the interfaced format. Online auctions are efficient in reducing the channel overheads for increasing the bandwidth of data overflow. However, Online auctions are particularly useful in identifying the market value when the value of the homogeneous product is unclear; and when the items of scarcity value have been sold on the level of the market value; and, whether a specific set of loyal buyers, and consumers has traded to a different buyer or disposed the product elsewhere. Furthermore, Ebay is increasingly attracting trade sellers who see it as an alternative distribution channel. Teens, for example, have the thrill to sell off their electronic products off from their home. Following by adults, have the thrill to sell off pottery, home care utilities, and others. Thanks to consumers for choosing online auction like EBay as the selling runaway train spot of collection. The bidding process starts with the type of audience with selected preferences to make a bid on a specific product and create an atmosphere between buyers and sellers who promotes the benefits of online auction to give a sense of security–a near addiction that keeps them coming back.

Dynamic Pricing

According to Garbarino and Lee (2003), Dynamic pricing is broadly defined as the buying and selling of goods and services in markets where prices are free to adjust in response to supply and demand conditions at the individual transaction level. Up until recently, sellers had the upper hand in the marketplace. Buyers relied on a certain amount of benevolent trust (trust that the seller placed the interests of the buyer over the interests of the selling firm.) and sellers were accumulating information about buyers at alarming rates. Dynamic pricing is a two edged sword. It benefits the seller in that it maximizes profit based on changing conditions. However, it will also erode the trust of the buyer. Most people feel that everyone should be offered the same price for the same product. For instance, a minority male, is curious about how much cost to add a cell-phone feature, i.e. an application from the software as he asked the seller online relaying instant message through EBay website. The cost for adding a feature from the software that this store have—the software has extra benefits to the feature for extra $5 dollars with store membership or that the software he has in his hand will not give him the access to the extent of the feature, which is $25 dollars for the installation only, said the seller. The minority male, said, “ ok”. Dynamic pricing offers different prices to different people based on certain criteria. With the Internet, a buyer has the ability to search for and find a variety of sources for the same product. And with the advent of on-line auctions, people found they could get new or nearly new products at much better prices than traditional sources offered. Dynamic pricing is where the price a business charges it customers today depends on the customers actions in the recent past- including what they bought, how much they paid, and whether they paid for high speed shipping- and personal data such as where they live. Perloff et al, ( 2004) elicited the practices of charging different customers, different prices for the same product or service is known as dynamic pricing Dynamic Pricing refers to fluid pricing between the buyer and seller, rather than the more traditional fixed pricing. Current models for dynamic pricing include auctions, reverse auctions (where buyers set the price they are willing to pay and then sellers bid for their business), trading exchanges, price matching, quantity pricing, and group pricing systems. However, the popularity of eBay and other dynamic pricing companies, where customers set the price for what is being sold, has helped some consumers become more accepting of dynamic pricing. Benefits of dynamic pricing are: it reaches more price-sensitive customers (e.g. teens, baby boomers). The prices of products can move excessive inventory that is aging, and gets a higher recovery cost which then should minimizes the inventory holding costs; and, this inventory determines to delineate an optimal price(s) for tangible and nontangible goods. Thus, the web host –Ebay- has the resources to increase site traffic by acquiring new customers in a cost effective way in order to decrease the operating fees, and maintaining a strong customer buyer and seller base.

Drawbacks

The drawbacks of dynamic pricing would be : (1) A brand image on high-end/high-quality goods has diminished; (2) A net work margins has reduced -(Unless, it is an online auction, the selling price will be less than the advertised retail price.); (3) Lack of anonymity: Sellers who does not want their current customers to see a different buyer giving a better deal to someone else (A real bargain) and buyers who does not want competitors to see the types of purchases they had made in transaction, in despite of ownership proprietary specifications they had in possession. Hence, in which, conclude that both buyers and sellers who have had it made in attempting to satisfy their choices and preferences on production selection. These choices lie at the very heart of economic problem, all ages starting from teens, baby boomers, females, and minorities are always coping with scare resources with limited features whenever they could get. For instance, a baby boomer want to make a purchase on a home care lawn mower from EBay. He the baby boomer sent a relay instant message to the owner of the lawn mower. The baby boomer, wrote, ‘ does the lawn mower have triple-spinner and a secondary brake’ —-The owner of the lawn mower , replied, ‘yes, this lawn mower have triple spinner and a secondary brake and it works if you want to work two way parallel mowing, however, it can work any ways you want to mow your grass more precisely’…In addition, Microeconomics examines the factors that influence individuals’ economic choices and how market coordinates the choices of various decision makers. Due to these consumer purchasing power issues and decision-making alternatives that marketers and consumers have to make when dealing with a product in a transaction.

References:

Perloff, J. M. (2004). Microeconomics (3rd Ed.). New York City, NY: Pearson Addison Wesley.