Price Guarantee Essay Example for Free

cost Guarantee EssayIntroduction terms justifys have become a popular promotional instrument for attracting new customers or selling new products to existing customers. Many business organizations argon now adopting the terms attempt concept in their pricing policies. Most notable among them is Walmart.General consequences of terms guarantees outlay guarantees fecal matter take two forms. One is hurt matching in which bring down outlays are immediately matched. The otherwise is wrong beating in which lower prices are gash by a certain pct of the difference. Both forms of price guarantees how invariably have immense implications as far as market involution and market retention are concerned. Obviously the assurance that they are getting the lowest likely prices result have a major impact on how the customers do business with the organization offer price guarantees. The effect of price guarantees is specially pronounced nowadays because of the extensive use of t he internet that customers make in arriving at their purchase decisions. Because of the widespread availability of information on the internet, consumers bum easily compare prices and determine taboo which union is offering the lowest prices.However it takes time-consuming research on the part of the consumer oddly if the product in question has intense competition. All businesses these days having products and services to sell are advertize their existence online, so the consumer looking for a particular product widely ready(prenominal) in variable prices pass on have to go through all those dozens of websites in order to make a worth mend price comparison and arrive at the lowest possible price available to him or her.However if in that location is a company out like Walmart which guarantees that the price it is offering is lowest available now and that even if market prices should go down in the future, the consumer allow for get refunds, then consumers get out just fa ll in love with that offer because of all the time and energy saved. As a result of the assurance on the part of Walmart that the product is selling at the lowest possible price now or even in the future, consumers will rush to spend all their money on Walmart offerings.According to the above, offering price matching or price beating seems to have an extremely convinced(p) impact on the mind curry of the consumers. However not all consumers are looking for the lowest possible price and this is especially true if the product in question is a status symbol, that is, the product is an subject field of image with the consumer. In that case, reference rather than price will be the prime consideration.Consumers putting prime(prenominal) before price will be asking themselves why a certain company is offering such low prices. The suspicion that these consumers would be harbouring is that the quality of the product is in question. Quality defects make products thorny to sell, however a n assurance of the lowest possible price will tend to make most consumers stratagem to minor defects that are not readily apparent. Some consumers will suspect that a particular company is adopting the policy of price guarantee in order to allay suspicions of product quality.Benefits of price guaranteesPrice guarantees pile create customer goodwill as the customers are sure that they are getting the best mess hall possible. Price guarantees are especially applicable in the retail industry as price is the tho differentiating factor in this case. The nature of the service involved in the retail industry is such that quality hardly varies from one company to another(prenominal). Therefore the only way for retail companies to make themselves stand out from the crowd is to differentiate themselves through price.This is the reason that price guarantees have become so popular in the retail industry and the customers are not complaining. They have no reason to because, as mentioned befo re, they no long have to surf for hours and hours or walk miles and miles of aisles for the best deal. They will just buy whatever they hire from Walmart because whatever they are buying, Walmarts prices are the best possible they crapper get. There is no surmisal of post-purchase regrets. This is the best of all possible worlds.As will be elaborated upon later on, price matching or price beating make it pointless for sellers to lower their prices as any benefits to be gained from the lower prices will be potcelled by the competing seller who is offering price guarantees. then price guarantees are a means of price signaling. It is this price signaling which assures the customers that they are getting the best possible deals.Price guarantees have become so prevalent these days that customers expect companies to offer price guarantees. As a result, offering price guarantees has become the very act of survival for companies particularly in the retail industry. maculation this ma y be greatly beneficial for the consumers, the situation is somewhat different for the suppliers. If there is one retail merchant for example who buys a television set for 150 and offers it to the market for 250 with price guarantee, then another retail merchant who happens not to have the buying power of the other retail merchant and buys the same set for 170 will have to set the price also at 250.The second retailer mogul want to undercut the first by setting a lower price, 240 for example, but the second retailer would have piffling to gain from this as price guarantee offered by the first retailer means that the first retailer would only either match the lower price or beat the lower price. This price sore can go on all the way down to the purchase price of the second retailer beyond which it cannot go. This is a discounting game which the first retailer will always win because of the price guarantee it offers. In this way price guarantees ensure that there is no price cut ting going on in the market and that customers always get the best possible deal.Legal implications of price guaranteePrice collusion has become a greater threat than ever now that the internet is facilitating connectivity at an scarce level not only between buyers and sellers but also between sellers. So it has become easier than ever for the sellers to reach some sort of an pact online and raise their prices simultaneously. Occurrences have been noted whereby sellers have been known to contend their prices online and raise their prices the next day. Such price collusion is obviously anti-competitive and so illegal.Price matching can also raise issues of price collusion in a roundabout way. What ability happen is that sellers might already be selling their products at a heightened price level and one seller might offer a price guarantee in one product category while another seller might offer a price guarantee in another product category. Thus sellers might be colluding to crea te their own niches in specific product categories. This impairs the market forces of tag on and requisite as the price setting mechanism and should become the focus of regulatory agencies to identify and regulate.Ethical implication of price guaranteeAccording to the invisible hand theory, consumers demand for a lower price while suppliers ask for a higher price and accordingly adjustments take place and in the process an agreement is reached between consumers and suppliers whereby both the buyers and the sellers are buying and selling respectively at the same price. This is the underlying organise of the free market economy. However the element of price guarantees can strike at this very asylum of the free market economy. What happens is that price matching, for example, discourages the other sellers from lowering their prices as the seller offering the price guarantee will only lower its own prices accordingly. Thus the phenomenon of price guarantees can perpetuate high price s at the expense of product quality and manufacturing efficiency.Manufacturing efficiency results from the learning curve. As companies gain experience in manufacturing their products, there is a learning curve which makes their manufacturing operations more efficient. As a result, products become cheaper to produce. According to the laws of supply and demand, this would allow suppliers to lower their prices and sell more. Not so however when there is one seller in the market practicing price matching.That seller has a pact with the buyer that the buyer will never rise up a lower price elsewhere and that if the buyer does find a lower price, the seller will immediately either match the new lower price or beat it. As a result of this pact, all the buyers in the market will be rushing to that seller offering price guarantees rather than to the other sellers who are offering lower prices. Inasmuch as offering price guarantees implicitly chips extraneous at the very foundations of dem and and supply as the price-setting mechanisms, the act is clearly unethical.The use of price guarantees can be put to other unethical means as well. There have been several countersign items where shops offering price guarantees have been known to lure customers to their geographical sites where these same customers are then set upon by sale executives in order to make them purchase expensive items.ConclusionWhether or not buyers suspect price guarantees encouraging tacit price collusions, buyers prefer sellers who are offering price guarantees. This is especially so with the advent of the internet where price information is available at the click of a mouse.Inasmuch as price guarantees turn heads in the buyer community, price guarantees hold great benefits for the seller. By using price guarantees sellers no longer have to resort to online discounters to offer lower prices and can reach the customer directly. In spite of the anti-competitive issues that arise as a result of the i mplementation of price guarantees, these guarantees, ethically and legally practiced, can strengthen the flow of trade and commerce.BIBILIOGRAPHYPindyck, Robert S., and Daniel L Rubinfeld. Microeconomics. South westward college pub. 2007.Varian, Hal R. Microeconomic Theory. McGraw heap/Irwin. 2005.Mankiw, N Gregory. Principles of Microeconomics. McGraw Hill/Irwin. 2005.Colander, David C. Microeconomics. McGraw Hill/Irwin. 2005.Nagle, Thomas T., and John Hogan. The Strategy Tactics of Pricing A Guide to Growing more Profitably . South western college pub. 2007.Baker, Ronald J. Pricing on Purpose Creating Capturing Value. McGraw Hill/Irwin. 2005.McConnell, Campbell R., and Stanley L Brue. Economics. South western college pub. 2007.