Great job in your response! The parallels you drew between the author’s illustration of pricing goods or services for consumers and your work experience as a retailer in a boutique shop was a great connection. Currently, I work at a mass retailer as well. Like your boutique shop, different companies supply our store with their merchandise, and we sell their goods to our customers. The businesses that stock our store’s inventory conduct large amounts of research into their target market, while factoring in a variety of external factors such as shipping costs, price of essential resources, and product demand to determine an equilibrium with their product’s price point. In your response you mentioned,
“Many things must be considered when we price the items because we must still make a profit that feels is worth the labor and money we already spent to get it in.”
I agree completely with your viewpoint on the price point system. As you mentioned, prices are set to measure value. This is the reason companies selling essential commodities, such as oil, have so much controlling power. Gas and oil sellers understand their products are being used internationally every day. As a result, they can marginalize their oil and sell it to their distributors at different rates which will differently influence its selling point. Despite gas prices rising consistently across the world, consumers are continuing to purchase it. This continuous purchase of gas communicates to the distributors that they can continue raising prices. However, if the oil companies were to raise their prices too high, what would happen? Some customers may not equally value the price required to purchase the services provided. Consequently, many users may convert to other more affordable means of transportation such as trains, buses, bicycles, or even walking.
In my response I outlined that all organizations go through this thought process with their prices scaling continuously. No matter if it refers to essential goods like apples, or luxurious services like lawn mowing. All sellers account for land, labor, and resources when measuring their price point. If any internal or external factor changes from the mean, it will directly impact the product’s price point and the company’s gross margins. Ultimately, the consumer holds the true power in the exchange. If customers are not purchasing the product or service frequently, every other element is rendered meaningless.