Emotional Strategies: Chatime's Theory Of Pricing Strategy
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Pricing strategy can be defined as the strategy that aimed on finds the product best selling price to accomplish overall organizational objectives (Kurtz, 2012). Pricing strategic is directly related to product positioning. It is because the managers must consider how much the target market is willing to pay and cover back of the product cost. Therefore, Chatime has decided to lower its prices on milk tea to target on common people.
First of all, penetration pricing is the major determinant of the price and that is employed when the product managers have to give most of the value to the customers and keeps a small margin. Chatime decided use penetration pricing where set a lower price of milk tea than the eventual market price to attract…show more content… Therefore, Chatime using psychological pricing strategy which is set those ending with nines or other odd numbers on all beverages to stimulate consumer demand and sometimes these are referred to as “just below” prices as they are often “just below” an even price such as RM1.99 vs RM2.00. For example, Chatime instead of charge RM6 for a milk tea beverage you might charge RM5.99 per beverage. Some consumers associate the price closer to RM5 than RM6 even though it is only one cent less and they may subconsciously be partially ignored. The theory that drives this is that lower pricing such as this institutes greater demand than if consumers were perfectly rational. Psychological pricing is one cause of price points to get more customers and the psychological pricing method helps Chatime build an impression of the brand without making significant changes to the product. Simply revising the pricing structure can make the product seem like the best on the market compare with other competitors or elevate the Chatime’s milk tea to the top of the available options. Although the price of Chatime’s milk tea is lower than competitors, customers are those who important of quality and price attributes will buy the products too. It is because customers are relatively insensitive to the product price. Customers willing to pay more for own