Essay about Dhl Pricing Strategy

1317 Words Jun 30th, 2011 6 Pages
DHL Case
1. Using the EVC framework (i.e., differentiation value), what opportunities exist for price customization at DHL? (In other words, where is there value that is not priced out?).
Based on the differentiation value, the following price customization opportunities exist for DHL.
- DHL can charge a premium for its extensive network span and coverage in remote areas that they serve, which are not serviced by their competitors, like Africa.
- Differentiation premium could be charged on high speed which currently DHL doesn’t do specially for parcels product line. Although DHL is cautious in charging for this differentiation because of lack of guarantee, their advertisements and strength are in that regards.
- Value added services
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It could be useful for securing global contracts. Worldwide pricing policy will simplify accounting for them as well as allow a lower cost for their biggest customers. It will allow DHL to attract global contracts and MNC contracts. This will help increase penetration in the same accounts and reduce splitting of document and parcel contracts.

Regional pricing allows DHL to effective extract a higher value from the customers in special areas like Africa – where they are the only service provider. Lowering the cost there won’t net them more customers, but will impact the company’s bottom line. Moreover, regional managers know their regions the best and they are responsible for profits and losses in their regions.

Worldwide pricing is convenient but less profitable. Costs and profitability were significantly different between geographies and regions. So setting up worldwide pricing could be profitable in some and unprofitable in other regions as profitability analysis would be done based on average costs. A central pricing policy will minimize any impact that the regional managers may have.

The pros for each approach are cons for the other. Given the facts in the case, the best option for DHL is to try a hybrid approach, where there is a base pricing structure which is worldwide. The regional managers have the authority to increase or decrease the price for their own regions depending on the type of the

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