Final answer:
Channel members should clearly communicate their pricing goals to each other when developing a pricing strategy. Using economic models, they can understand how prices are set and adjust to market conditions. The balance of efficiency and variety in product offerings also needs consideration.
Step-by-step explanation:
When channel members are developing a pricing strategy, it is crucial that they clearly communicate their pricing goals to one another. This creates a cohesive strategy that takes into account the various perspectives and goals of each member of the channel. For example, manufacturers, wholesalers, and retailers all play different roles in delivering products to the consumer and each has different costs and margin goals. By aligning their strategies, they can work together to set prices that are competitive in the market, fair to consumers, and sustainable for the businesses involved.
Prices are determined in a competitive market through the interactions of supply and demand. Economic models can help to predict and explain changes in prices, considering factors like price elasticity, which measures how sensitive the quantity demanded is to a change in price. For instance, the supply and demand curves highlight how equilibrium prices are established and how these prices can change when the curves shift due to external factors.
In the market, competition leads to a variety of products. The opportunity cost of having a diverse array of products is that each product may cost more per unit compared to if only one variant was available. Hence, businesses should balance the need for variety against the need for efficiency and cost control in their product offerings.