With increasing popularity of e-commerce, retailers such as Amazon, Wal-Mart, Best Buy, Target, and Office Depots are involved in a price matching war in order to attract consumers. The traditional retail pricing strategies are challenged and some look at key value categories (KVCs) and key value items (KVIs) to refine pricing strategy in today’s digital retail environment. Free shipping is considered a part of pricing strategy for online retailers, while payment transparency and overall price image of retail stores (OSPI) serve an important role in a consumer’s purchase decision. In this case, we will look at Amazon’s pricing strategy and tactics.
Falk, T., Kunz, W. H., Schepers, J. L., & Mrozek, A. J. (2016). How mobile payment influences the overall store price image. Journal of Business Research, 69 (7), 2417-2423.
Kilroy, T., MacKenzie, I., & Manacek, A. (2015). Pricing in Retail: Setting Strategy. McKinsey & Company. Retrieved from http://www.mckinsey.com/industries/retail/our-insights/pricing-in-retail-setting-strategy
Loeb, W. (2014, Nov. 20). Amazon’s Pricing Strategy Makes Life Miserable For The Competition. Forbes. Retrieved from https://www.forbes.com/sites/walterloeb/2014/11/20/amazons-pricing-strategy-makes-life-miserable-for-the-competition/#5b8997c35c60
Reimers, I., & Waldfogel, J. (2017). Throwing the Books at Them: Amazon’s Puzzling Long Run Pricing Strategy. Southern Economic Journal, 83(4), 869-885. doi:10.1002/soej.12205
Relentless.com; amazon. (2014, Jun 21). The Economist, 411, 23-n/a.
Roesler, P. (2014, Nov. 24). Why Free Shipping Is a Must. Inc. com. Retrieved from https://www.inc.com/peter-roesler/why-free-shipping-is-a-must.html
Snyder, B. (2015, Jan. 16). Report Analyzes Amazon’s Dynamic Pricing Strategy. CIO.com. Retrieved from http://www.cio.com/article/2870961/consumer-technology/report-analyzes-amazons-dynamic-pricing-strategy.html
Read and cite articles listed above, supplemented with any other articles related to Amazon’s pricing strategy, and develop a report addressing following issues.
- Briefly describe Amazon’s pricing strategy and providing background on the company and retail industry.
- Compare Amazon’s pricing strategy with that of its key competitors and discuss whether or not Amazon’s pricing strategy works.
- Explain why Amazon’s pricing strategy works or does not work. Support your position in terms of environmental factors such as economy, the competition, and changing consumer behavior, as well as Amazon’s segmentation, positioning, and branding strategies.
- How do you think Amazon will perform in the next five years? Take into consideration the competition and relationships between pricing and other aspects of the marketing effort such as promotion, distribution and so on.