Skip to main content

In the Spotlight

A shopper stands in front of a rack of clothing on hangers holding an item of clothing.
Figure 12.1 Price is one of the marketing mix elements and a factor that impacts customer decisions. (credit: modification of work “Thrift Shop Helps Consumers, Community” by W. Wayne Marlow/USAGHumphreys/flickr, CC BY 2.0)

Chapter Outline

12.1 Pricing and Its Role in the Marketing Mix
12.2 The Five Critical Cs of Pricing
12.3 The Five-Step Procedure for Establishing Pricing Policy
12.4 Pricing Strategies for New Products
12.5 Pricing Strategies and Tactics for Existing Products
12.6 Ethical Considerations in Pricing

In February 2005, Amazon launched Amazon Prime, which offered unlimited two-day delivery for millions of items.1 At a time when consumers were accustomed to paying high shipping fees and experiencing slow service, the membership service—$79 per year—offered a new alternative. It was a first-of-its-kind pricing structure that has sparked many companies to do the same. Today’s subscription services cover everything from toilet paper to dog toys. Amazon Prime is still arguably the most prevalent subscription service in history. In 2021, Amazon reported its Amazon Prime members had reached 200 million worldwide.2

The membership, according to a public letter from Jeff Bezos, executive chair of the Amazon board, “takes the effort out of ordering; no minimum purchase and no consolidating orders. Two-day shipping becomes an everyday experience rather than an occasional indulgence.”3

Since its first offering in 2005, Amazon has raised its prices only three times—in 2014 to $99 a year, in 2018 to $119, and most recently to $139/year.4 While rumbles in the market suggested that these price increases might drive away customers, Amazon has proven this was not the case. The price increases through the years also included new benefits—Amazon Prime video, Prime Pantry, Prime Reading, and many others. The company demonstrates that consumers are, in fact, willing to pay higher prices—so long as they can perceive value that is added to the increase in price.

 

Citation/Attribution

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information

  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-marketing/pages/1-unit-introduction
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-marketing/pages/1-unit-introduction

Citation information

© Dec 20, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

Back to top