Pricing Strategy & Special Topics

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Table of Contents

What are your thoughts on the success or failure of these two initiatives?
Creative Pricing Strategies
Works Cited

What are your thoughts on the success or failure of these two initiatives?

Tata Corporation has recently announced that it will manufacture, and sell later this year a four passenger vehicle that will sell at around $2100. At that price it will be the cheapest car in the world. The Nano is a safe affordable, all weather vehicle aimed at hundred of thousands of families in India who would otherwise have bought motorcycles.

The Indian Ministry of Development on the other hand has announced that, it will develop and distribute an ultra-cheap tablet PC, the Sakshat which will retail at 35 US dollars equivalent to 27 Euros. The computer is aimed at students and low-income groups especially in the rural areas of India.

The two initiatives are likely to succeed because of several reasons. First, is because of the fact that these products are targeted towards a market segment with a huge untapped potential.

The millions of people in the low end of the market have been neglected in the past and no products have been developed for this market segment. These people have been ignored by manufacturers in the past because they were thought to have no buying power.

Secondly, the initiative is likely to succeed because the price cost of owning and using the products is affordable. The Nano costs about $2100 and its fuel consumption is very low at 50mpg.

Likewise the tablet PC costs $37, a price so low that IT experts doubt whether it would be attainable. The PC can be powered using solar power therefore those not connected to the power grid are not affected. These costs are within the reach of many ordinary people who compose the target market.

In addition these products despite their low prices do not compromise on quality. The Nano meets all the safety and environmental requirements which makes it’s as safe as any other vehicle to drive. The tablet PC on the other hand has advanced features which are found in modern tablet PC such as Android software for browsing the web, it is Wi-Fi enabled, has a seven inch screen, USB ports and 2 GB memory.

In conclusion the products are most likely to succeed as they target a huge unexploited market; the products are affordable and the government minister is determined that the project must succeed whatever it takes, on the other hand the Tata management has put in place mechanisms such as expansion of manufacturing plants in order to ensure that the project succeeds.

Ethical Issues

It is commendable that the two organizations seek to bring useful products to low-income groups and the underprivileged in the society. The Nano affords the poor, a safe, all weather, and comfortable car while the Sakshat computer enables millions to be integrated into the global IT revolution. The two products put aside the strong profit maximization motive and instead aim to help the underprivileged in the society.

Despite being cheap, they do not compromise on quality and standards and the burden of maintaining and operating the product is minimal (50mpg) or zero when solar powered.

The negative imperative is that the cost of producing the tablet PC may require government subsidies which IT experts feel is not what the people in the rural area need because it is designed for university student. This implies possible wastage of government funds.

In the case of the Nano, the car is stripped of certain features such as airbags; these means it is less safe than others. Regardless of the need to economize safety standards should be maintained at all cost even if it requires the price of the vehicle to be increased upward.

Creative Pricing Strategies

In this section we are going to briefly discuss the five major pricing strategies that are evident in our case scenario analysis, these are;

Discounts and rebates: Car dealers are offering discounts and rebates to entice customers to buy. For example a fully loaded Ford Fusion whose price tag is $25,000 goes for $20000 when “all is said and done” (Langfitt).

Substitute products: Car dealers propose to customers’, products that match the customer’s budget and desire. For example, a customer with budget constraints might opt to buy the lower priced S model of Ford Fusion rather than a more priced model.

Used cars: Car dealers also use the option of selling used cars to their customers to meet the needs of people who may want a car but may not be able to afford a showroom vehicle. Most dealers apparently make higher margins on used cars than new cars because unlike new cars whose prices and margins are fixed, used cars are not.

Trade-ins: This refers to when the value of a used car is used as payment for a new car which is deductable from the overall amount. The buyer would benefit because they don’t have to incur costs and time advertising their old car but get a rebate for the value equivalent to their old car.

Selling value products: Car dealers are stocking vehicles that correspond to the prevailing market conditions. When the price of fuel goes up for instance, fuel- efficient cars or cars using alternative fuels are sold at a premium price; one the other hand when the situation changes such cars are sold at a discounted price.

Types of Marketing

Marketing of products is different from marketing of services for various reasons; however the main reason is because products and services are essentially different in nature and form; whereas you can see touch smell and feel a product, services are intangible, invisible and transient (Lovelock and Wirtz).

Another difference is that products can be stored; services cannot be stored and have to be consumed in real time (Lovelock and Wirtz). Finally, products especially durable ones are produced long before they are to be consumed while services are produced when a customer orders for them and consumed immediately usually at the same place.

Some of these examples are when a car is manufactured long before it is delivered to a show room or a service like a visit to the dentist where the dentist treats a patient only when the patient enters into a dentist clinic.

Since services are invisible and intangible, it is difficult for prospective customers to know the quality of services they are buying. When buying a product e.g. furniture a customer can see, feel, smell, touch the product and decide what to buy.

Works Cited

Langfitt, F. “Cash or Credit, Car Deals Abound.” National Public Radio, 2009.

Lovelock,C. & Wirtz, J. Services Marketing: People, Technology, Strategy 6^th Ed. New Jersey: Prentice-Hall, 2007. Print.

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