Nominal versus Real
In recent time inflation in Australia and most parts of the western developed economies has been low. However it has been the case particularly here in Australia that some years ago we had high levels of inflation. Inflation has a role to play in marketing of our products and services.
Many marketers say that if you have a product that is for sale at $50, don’t sell it for $50, sell it for $75 discounted to $50. As time goes by inflation could eat into your profit and you’ll have to raise the price, but if you have it advertised as a reduced figure you can reduce the discount. So the price would still be $75, discounted now instead of $50 to say $55 or $60.
This technique is often done by a lot of the retailers and as consumers we look at the top line price, even though the reality is that top line price was never probably a real price. The issue of understanding the power of inflation in pricing is important to consider.
Photo by:- Alan Cleaver
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