On Consumer Surplus and Pricing Strategy Essay Example | Topics and Well Written Essays - 500 words

On Consumer Surplus and Pricing Strategy - Essay Example For each commodity marketed, customers assign a certain amount that they are willing to pay. Some business organizations are able to price according to the customers’ perceived value of their offering. However, some may be priced less than what the customers would want to pay for them, thereby robbing the companies of profit potential. Consumer surplus is defined as "the amount that customers benefit by being able to purchase a product for a price that they would be willing to pay" (Economic Surplus 2007). When company prices are less than the amount that buyers are willing to pay for the product, customers will enjoy the consumer surplus in purchasing the product. Thus, companies should be adept in their pricing strategy. They should be able to determine individual consumer surplus and fully expropriate it for their advantage. Identifying the exact value attributed by buyers to a product is a great challenge for a business organization. As individuals are unique, they often h ave different perceptions of the monetary value of an offering. Some price-sensitive customers may find a product too expensive but some may even find it a bargain. One of the things that the company can do is to conduct a survey before releasing the product in order to get an average price that the target market is likely willing to pay. The company can also experiment by raising and lowering the price in the market and monitor the customers' response through product sales and demand. However, all these can be very tedious and can erode the identity and image of the product in the market. It can even bring confusion to the customers.

Celebrities in Advertisements Essay Example | Topics and Well Written Essays - 750 words

Celebrities in Advertisements - Essay Example Hence, the celebrities have become a strong weapon of influence in the hands of advertisers as they not only help in selling the products, but also help in creating a long lasting psychological association between the product and the consumer, which ensures the future success of the brand. Celebrities In Advertisements As per the modern trends, advertising can be defined as â€Å"a paid persuasive communication that uses nonpersonal mass media –as well as other forms of interactive communication- to reach broad audiences to connect an identified sponsor with a target audience† (Wells, Burnett and Moriarty 5). From the definition, it is clear that advertisers use the advertisement to persuade people to take some action or to take a decision related to the products that are being advertised (Wells, Burnett and Moriarty 5). However, making a consumer to take a decision regarding a product is not as easy as it seems as there are hundreds of different brands selling the same kind of products. Hence, the advertisers have to use a strategy that is highly powerful and highly impacting. This is where the role of the celebrity in advertisements begins. The fact that approximately one sixth of the ads world-wide features the celebrities shows how beneficial it proves for a brand to have a celebrity feature in the advertisements (Shimp 250). Moreover, the salaries the celebrities are paid are huge. According to a report on top endorsement incomes of athletes (2007), professional golfer Tiger Woods and Phil Mickelson were paid $100,000,000 and $47,000,000 respectively, for the ads (Shimp 251). To endorse the brands, the advertisers use variety of celebrities from the field of television, movies, sports, athletics and even politics (Shimp 250). It is believed that celebrities have the power to influence the attitudes and behavior of the consumer towards the brands as they are respected and loved by the consumers (Shimp 250). The brands pay huge salaries to the celebrities to advertise their products as they think that celebrities can positively influence the consumer and increase the sale of their products (Shimp 250). Studies in the field of advertising have revealed that there is a positive link between the ‘famous people’ in the brand and people’s favorability towards it (Pringle 69). The chances of success of a brand increases when it features one of the likeable celebrities in its advertisement (Pringle 97). Hence, it is believed that celebrities have the power to influence the decision of the people. However, what really works behind the success of the brands featuring celebrities in their ads is the method of ‘mental association’. Psychology Behind Celebrity Advertisements It has been proved that the presence of celebrity in the brand advertisement increases the chances of its success. The explanation for the effect of celebrity advertisements on people’s behavior and thinking can be found in the psychological theory of ‘mental association.’ According to psychoanalysis theory, the principle of ‘association’ governs the mental life of human beings (Richards, Macrury and Botterill 140). The theory states that when a person has any experience, his mind creates an association between the feelings related to that experience and the elements that were involved in that experience (Richards, Macrur