Introduction To Low Cost Strategy And Differentiation Strategy

• Explain demographics, Geographic’s, psychographics and why companies use these methods to segment the market effectively

Demographics make sense to me. My example is about the demographics of Forever 21 shop clothing. Their main customer focus on the big teen retailers from 18 to 24 years old, female and male fashion, young, active, and fashionable customer. The education level is College and completed. Their price strategy is reasonable and low budget

The strategy was to offer low price in the market which led to setting the lower prices. Niche marketing was used in setting the prices to be offered for the different market segments. Products with market target specifications are availed. The low-cost strategy was applied to set up the budget of the firm. It would use the least possible production budget to cut the price of products. The combination of strategies assists in maintaining a key position in a market. Compete effectively with opponents.

A target audience can be separated into deferent groups such as gender, age group, marital status, e.g. male, young people, single people.

Demographic refers to the variables of age,gender,income,occupatios of consumers. Famous Amos target on children, teenagers and young adults in their business. (AGE) Those who afford to buy Famous Amos are usually from highly income. (INCOME)

A differentiation strategy seeks to provide products or services that offer benefit that are different from those of competitors and that are widely valued by buyers. (Johnson, Scholes&Whittington, 2008). The aim of using differentiation strategy is to achieve competitive advantage. This could be achieved for example like the clothing brand ZARA, by offering better products at the same price. A differentiation strategy must be based on two key factors: the strategic customers, the company has to identify their needs and values, company also must identify who are its main competitors.

Predatory pricing is the strategy of pricing the product at a very low price to drive the competitors out of business.

When figuring pricing strategies within the perfect competition model a firm must consider that the attributes of the product and any cost advantages will eventually be exposed, and will either be mimicked or beaten (Whinston, 1995). Though the perfect competition model is ideal, it is seemingly impossible for a single firm to consistently produce its services and goods at the lowest cost. Thus, the perfect competitor must continuously seek to improve cost management, its production technology, and even the economies of scope. The most effective way to do so is through the cost leadership strategy (Kimmons, 2013). This strategy both requires and allows the corporation to constantly seek ways to further decrease costs, enabling the firm to stay more advanced with leverage over the competition. This process needs to be repetitive, in order to maintain established leverage.

opportunity for the company and has made it more appealing to new customers and as a result made more profit for the company.

As we all think at times and ask ourselves, how did Wal-Mart become the world’s largest retail chain? Or why is Apple the most valuable technology company even with high priced products? First companies have to understand their market and strategies according to its demand and income level, regardless of whether they intend to offer their products at a low-price or high price. What do you think of when you hear the words “Pricing Strategy”? One of the four major elements of the marketing mix is pricing. A pricing strategy refers to the method companies used to price their products or services. Pricing strategy being with a market analysis of what the ideal product price for a given product of service should be. Either if the business is small or large, they base their products or services on production, labor worked, and advertising expenses. Once these prices and totals are established they then add on a certain percentage to generate a profit. When dealing with pricing strategies it tends to be one of the most critical components of the marketing mix. It cost to produce and design a certain product, and it cost to distribute a product and cost to produce it. When a company chooses a pricing strategy they dramatically impacts the profit margin of their business, and it also determines the pace at which the business can grow.

As mentioned, the objective is to have a price that reflects value; we are competing based on higher quality rather than lower cost. Consequently, if a low-cost strategy was used for our products and services, this will discourage our customers from thinking that the product and services are of high quality. This pricing strategy will not have a negative impact on the target customers as they are insensitive to price due to the nature of the products and services, and their buying decisions are more dependent on the value and quality of products rather than price.

These types are cost leadership strategy, differentiation strategy and focus strategy.cost leadership strategy is when a organization exploits all opportunities that will have a cost advantages to become the lowest cost producer in the industry and be the lowest cost producer leader. Differentiation strategy is when an organization to be unique in the market by producing products and service that are patronized by customers and deemed different from competitors. The third strategy would be when a organization focus on one market or one group of segment in the industry, it narrows down its focus and aims to serve them well, this strategy is characterized as focus strategy or segmentation strategy. Thus, overall, the segmentation strategy is based on a narrow market scope, whereas differentiation strategy and cost leadership is based on the wider market sector. However, what distinguishes the cost leadership strategy from differentiation strategy is the low cost

Focused low cost and Focused differentiation is the same as the above two strategies but they are focused to specific customers or a specific target market

With the advent of the era of globalization, many companies fail to notice that a steady state rise in the low-cost rivals in the same market. An evaluation strategy during which an organization offers a comparatively low worth to stimulate demand and gain market share is the low cost pricing. It 's one in every of 3 generic selling ways that may be adopted by any company, and is sometimes utilized wherever the merchandise has few or no competitive advantage or wherever economies of scale square measure realizable with higher production volumes which is additionally known as low worth strategy. Lower costs owing to the massive variety of competitive corporations are seen everywhere.

It is a business strategy that allows a company to lowest cost production in an industry. There are two options in businesses to improve profits, increasing or decreasing costs. This strategy focuses on acquiring a highest raw materials at lowest price then change them into valuable consumer goods. Low cost leadership often leads to increases in market share.