Price – Affordability
Traditional pricing strategies often follow a continuum with two antithesis points: one being low margin and high volume, and the other being high margin and low volume. Between those points there are different pricing strategies that can be adopted by firms in order to differentiate themselves on the market (Thompson, 2012).
According to Prahalad (2010), firms have to transmute this traditional pricing strategy in order to prosper at the BOP market. They need to ascertain that their products and accommodations on offer are affordable to their target segment. The reason is that companies conventionally define the sales price predicated on the engenderment costs, without mentioning the high margins expected. This method does not consider how much the BOP consumer can or is inclined to pay for a certain product. Therefore, applying this traditional practice fail to offer affordable products to the BOP consumers. Products in this case are customarily well above what the BOP consumer can pay for (Prahalad, 2010).
An alternative pricing strategy is conventionally applied by reducing the quality of the product, making its features as simple as possible that could make the product marketable (Karnani, 2007). Garrette and Karnani (2010, p. 45) argue that “it seems the BOP consumers like inexpensive, low-quality products”.
This is the case of Unilever and Procter & Gamble selling for example diminutive packets of shampoo and skin cream (Prahalad, 2010).
Your paper discussed the importance of pricing to a company's strategic position in the marketplace. The different considerations in the pricing strategies were also explored. You described good value pricing and the concept of loss leader as one of Wal-Mart's strategies.
When a business can provide a lower cost, then the business can have the ability to lower their price. Providing a better pricing system, along with sharp value products can only increase the chance of growth and customers’ overtime.
Pricing can play an important role in the success or disaster of any product. Too high a price and the product will fail; too low a price and not enough profits will be made to sustain business operations (Hisrich, Peters, & Shepherd, 2014). The key is to make the customer think that they are paying exactly the right price for the product. Anything else though in this regard means the product is not positioned well in the mind of the consumer. First of all, Gril-Kleen will have to decide on what sort of strategy it needs to pursue. This strategy is decided on three factors namely costs, margins and competition.
Companies can choose many ways to set prices, skimming price strategy where a company sets a higher price than normal and a penetrating price where low initial price is set. “Pricing
Because CVS must consider several factors affecting its business, such as: suppliers, consumer demands, competitors and their existing products, pricing strategies are complex. Options for pricing strategies may include: membership or trade pricing, geographical pricing, penetration pricing, product bundle pricing, discounts, and closeouts. Options for non-pricing strategies include:
CVS needs to think through numerous elements impacting its’ business. Pricing strategies, rivals and their current products, consumer demands and suppliers are examples of these elements. For pricing strategies, CVS should consider closeouts, discounts, product bundle pricing, penetration pricing, geographical pricing, and membership or trade pricing. For non-pricing strategies, options comprise: enhanced service quality, longer opening hours, advertising, and extended warranties (Kimmons, n.d.). By pricing similar products in a different way they must focus on regional demographics because geographic pricing enables the maximization of profit. For promoting unique or new products at provisional price drops, penetration pricing is the most effective. Finally, bundle pricing and closeouts can be engaged when several
Best-cost provider strategy permits companies to aim squarely at the sometimes great mass of value-conscious buyers looking
Although they are able to somewhat control prices due to their product differentiations and their status as a brand name, they will make profits by lowering price. However the danger in lowering prices is that with each additional product, utility will drop for the consumer. Therefore, firms must be careful in balancing consumer demand with the projected consumer utility.
Third, the price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number of possible pricing strategies. The most commonly used are:
Today’s highly competitive business world forces companies to create different tactics and relatively rely on multiple pricing strategies to conduct business.
The strategy for setting a product’s price often has to be changed when the product is part of a product mix. In this case, the firm looks for a set of prices that maximizes its profits on the total product mix. Pricing is difficult because the various products have related demand and costs and face different degrees of competition.
Course Modules help instructors select and sequence material for use as part of a course. Each module represents the thinking of subject matter experts about the best materials to assign and how to organize them to facilitate learning. Each module recommends four to six items. Whenever possible at least one alternative item for each main recommendation is included, as well as suggested supplemental readings that may provide a broader conceptual context. Cases form the core of many modules but we also include readings from Harvard Business Review, background notes, and other course materials. I. Overview of suggested content (HBS cases unless otherwise noted) Title 1. Module Overview
Quite often, consumers purchase goods and services based on their perceived need. Upon making the decision that a need is present and a solution is available consumers are more equipped to react to that need. Although previously perceived that consumers will normally accept prices as presented by suppliers that remains to not be the case. Consumers assess and process prices based on past purchases and other psychological process they went through previously such as persuasive marketing strategies, accessibility of the goods or services and possibly information gathered from prior purchasers of a product. There are countless options that are available to consumers. Consumers are then faced with the choice of choosing the product that best fulfills their need at that given point. Consumers who are knowledgeable regarding prices will be aware of the approximated price for products (Zhao, Zhao & Deng, 2015).
Price interacts with all other elements of the marketing mix to determine the effectiveness of each and of the whole. The objectives that guide pricing strategy should be a subset of the objectives that guide overall marketing strategy. Thus, it is probably wrong to view price as an independent element of marketing strategy or to assert that price, by itself, is a central element in the marketing mix.” (Webster, 1979)
Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).