Blog 4, Module 4: Marketing

Blog 4, Module 4: Marketing

Marketing in one word is: complex.  According to Dholkia (2021), in a journal published in the Wall Street Journal, “raising prices but keeping them the same holds the key to a successful price increase” (Dholakia, 2021).  Customers are more educated than before with more choices to choose from.  If prices increase too high, sales will decline; inversely, decrease prices and sales will increase.  This was a concept we acquired through the analysis of the demand curve in our prior MBA class, ACC505.  In module 4, we learned of price’s role in the marketing mix.  Dhruv (2008) states, “price is the only marketing mix element that generates revenue and is ranked as one of the most important factors in purchase decisions” (Dhruv Grewal & Levy, 2008). “The holy grail of pricing strategy is in finding ways to circumvent this seemingly ironclad economic claw, to raise prices without losing sales” (Dholakia, 2021).

According to Dholkia (2021), in How Companies Raise Prices without Raising Prices a journal article published in the Wall Street Journal, there are several common ways companies secretly raise prices (Dholakia, 2021).

1.      Unbundling services, lowering product quality and devaluing reward programs. (Dholakia, 2021).

One example from the article is that airline tickets are almost the same price as they were over 20 years ago, which might be because services have been unbundled. The customer pays per item. When I think of this, Spirit Airlines comes to mind; there are extra charges for every little thing, from baggage to boarding to seat selection.  The quality and value of the plane rides are far less than they were 20 years ago.  In Module 4, we learned about the substitution effect: in this case, if competitors are not also using unbundling, customers are likely to switch to a substitute purchase and move to a competitor.  

2.      Shrinkflation and the quantity surcharge (Dholakia, 2021).

 All shoppers are familiar with this; you feel you are getting a good deal from the packaging, but then you open the package and find that there is little quantity in it.  On the opposite spectrum is the family, party, or jumbo size.  People often believe that a larger quantity will be cheaper. “Brands routinely exploit this common customer belief by marking up larger packages more, and earning a greater margin on them” (Dholakia, 2021).  Grocers will also pick and choose which brands to sell, related to higher profit margins, and place the goods in a premium location with high visibility, and vice versa for lower profit margin brands.  Moving goods to higher visibility aligns with the 5Cs of pricing.  The customer reviews the cost versus the competition and perceives they are receiving a good value.  The company’s goal is to maximize profit. 

3.      Disappearing deals and coupons (Dholakia, 2021).

Everyone loves a good deal, especially when it comes to promotions.  “Incentives such as buy one, get one, and free shipping are common in many industries” (Dholakia, 2021).  When there is a promotion, the price paid by the consumer is less; thus, the company must find a way to raise the cost due to the promotional deal. 

4.      The sunk costs of memberships (Dholakia, 2021).

People swear by the big-box stores, such as Costco and Sam's.  They have loyalty to it, driven by a strong belief that the big-box membership store provides better value.    One must remember that with this value, you are also paying membership fees.  “Membership fee camouflages the actual price paid by customers” (Dholakia, 2021).

5.      From good to better and from better to best (Dholakia, 2021).

Another way companies discreetly increase prices is with higher-quality goods sold at higher profit margins.  Companies will keep their popular items competitively priced or lower prices to boost demand, then adjust their premium products to increase profit margins.  “Prestige pricing - a pricing strategy in which prices are set at a high level, recognizing that lower prices will inhibit sales rather than encourage them and that buyers will associate a high price for the product with superior quality; also called Image Pricing” (Prestige Pricing, 2025).  This can be demonstrated in the demand curve, having an upward sloping curve (Dhruv Grewal & Levy, 2008).

 

References

Dholakia, U. (2021, November 21). How companies raise prices without raising prices. Wall Street Journal. Retrieved June 24, 2025, from https://www.wsj.com/business/retail/how-companies-raise-prices-without-raising-prices-11637490602?gaa_at=eafs&gaa_n=ASWzDAh7TyCs7N11ENxfEY2t-5025UNZ3IJULsOAJ9igMyEvFl11o18jkueceCZ2R8w%3D&gaa_ts=685abb5d&gaa_sig=HzAvWzwe4LxN-KZ77Soa2CHn236vmcgwpjTLJp-KwOtva3qIjKjoFGM7n69VdGFZzcBoo7hNl1gJpk3WtSzksw%3D%3D

Dhruv Grewal & Levy, M. (2008). Pricing - slides (BUS 501, University of Illinois Springfield) [PowerPoint]. https://uispringfield.instructure.com/courses/17974/pages/module-4-applying-marketing-fundamentals?module_item_id=841558

Prestige pricing. (2025). Monash University. Retrieved June 24, 2025, from https://www.monash.edu/business/marketing/marketing-dictionary/p/prestige-pricing