Category: Pricing Strategy

Introduction

Marketing positioning statement is always defined as the process in which various companies try to create a good image to the customers in order to win more clients. This process can also include, rebranding the products in order to give them an attractive image (Chiu, 2004).In this statement the paper will be based on certain key issues which are very essential. The most important things are the expectations of the market, motivation of the consumers, values, attitudes and the comparison of the markets being chosen. While positioning the product, one should consider the following:

• Defining the competitors
• Customer involvement
• Determine the target

Expectations

In any marketing plan there must be objectives, either to the clients or to the company. Behind the objectives of the company there is the corporate mission, this is usually the definitions of what the company is and what it believes in. The expectations of a company must mostly be based on the financial objectives of the same. According to Chiu (2004 p, 12)”expectations-confirmation theory posits that expectations, coupled with perceived performance, lead to post-purchase satisfaction”. Mediation of this effect occurs by negative or positive disconfirmation between performance and prospect. Where a product outdoes expectations, post-purchase satisfaction occurs. When a product falls less of expectations, dissatisfaction of the consumer may arise.

Motivations

For any company which is in desire to stay afloat in the market it must give its customers some motivation in order to keep them coming back to their premises, other wise the company might become irrelevant in the industry. It has been proven that the customer’s behavior of purchasing is mostly influenced by proper marketing and good branding. Some customers may be influenced by discounts offered in products they purchase, thus the discount acts as a motivation to the consumer. The other type of motivation is transportation of goods; some commodities may be too bulky for the client to carry, so it is of importance for the company to provide such a service (Irwin, 2008).

Values

Some consumers believe in certain values and they will purchase goods which are in tandem with those values, some of these values may be personal, communal or cultural. These values change periodically so it is prudent for the companies to consider these issues while conducting their marketing and branding strategies other wise they may contradict consumers needs (Chiu, 2004).

Attitudes

This is a general feeling of what one likes or dislikes, these feelings can be lasting but always change with time. The attitudes of a consumer play various functions in purchasing of products. Consumers have various attitudes towards products the company and there brand associations which may impart negatively or positively to the business (Irwin, 2008).The attitudes of consumers are either personal communal or even cultural. It is always prudent for companies to consider these issues before conducting any marketing strategies so as not to contradict the clients (Chiu, 2004).

Conclusion

In this paper I have tried to focus on two main types of markets which are financial and predictive markets. In the former, customers are mainly corporate such as companies, this signifies that the individual customers are disadvantaged, but for predictive markets, individual customers always have an upper hand (Irwin, 2008).It is also of importance to note that, predictive markets do not offer accurate information which leads to a biased conclusion in companies, thus leading them to render a misinformed judgment.

References

1. Chiu, C.M. (2004). Strategies for Change: Logical incrementalism. New York: Oxford university press. Marketing Journal, 3: (13),pp, 12-5.
2. Irwin, D. (2008) .Industrial Management & Data Systems, Chicago: Chicago University press.

The marketing strategy of a new product requires a number of considerations as it determines the future demand of the product. In this regard therefore, marketing managers ought to come up with the best strategies; which would be geared at ensuring the gain of popularity of their products in the market. More so, the marketing decisions made should be based on the marketing objectives of their products which would further determine the visibility of the products to both their competitors and the customers. As stipulated by the law of demand, consumers are in most cases sensitive to prices; and thus any new product in the market has to be priced accordingly so as to enhance its popularity. More specifically, product marketers have to employ the best marketing strategies for new products which would determine its general popularity in the market as well as its future demand. This paper critically evaluates the pricing decisions of two new commodities, QwikDry Diaper Rash Spray and ‘This and That’ so as to enhance better position in the market in terms of their demand in the future.

Perhaps, the skim pricing strategy for QwikDry products seems to be much promising in the sense that; it allows for familiarization of the product by the customers when its price is still low. Being a high quality product, QwikDry Spray is expected to gain popularity by customers as its outcomes are perfect and its price is lower than that of other related products. In this case, the customers are expected to test the product and develop a strong preference towards it; where in the future its prices would be raised. This would be preferred in the assumption that; other related products’ prices will not drop as this product is being offered at lower prices in its initial marketing stages. Generally, the penetration pricing strategy would work perfectly given that; when the product is launched, other competitors would not change the prices of other related products.

On the other hand, ‘This & That’ bag pricing would be based on the skimming strategy as in the case of QwikDry product. As a new product, This and That would maximize its profits in the long run by first allowing its customers to get used to it when its price is still low and then rise it as it gains popularity. Through enticing customers with low prices, its demand is expected to go higher as the customers familiarize themselves with it; and then hike the prices afterwards. By so doing, the marketers of This & That have to bear in mind that, as they offer the product to ‘test’ through lower prices; their future income would be higher as the product gains popularity among the customers. Further, as the product gains recognition among the customers; the product marketers can then decide to offer the product in better packages but still promote their customers through discounts or shipping costs. Moreover, the benefits of this strategy would depend on the feedbacks received from customers on whether they like the product or not.

Generally, the skimming pricing strategy would be very essential for the new commodities as this would ensure its high demand both in the short-run and the long-run. In this respect therefore, this strategy would offer the best opportunity for the marketing of the products to a great deal.

Introduction

Pricing is a set of calculations involving the product’s value and costs that allows attracting customers with a reasonable offer while providing profits for the business. For this new learning platform targeting Computer Science studies, the price should be below a cost of a University degree in North America but above the cost of studies offered by competitors—Coursera and edX. Hence, it will be premium when compared to other learning platforms but economy pricing when compared to offline studies. The objective of charging a premium over Coursera and edX’s services is justified by extensive support and face to face communication with educators that these learning platforms do not offer. This paper outlines the pricing strategy and objectives for the new product and presents the marketing activities calendar and budget.

Price Point, Strategies, Objectives

Premium pricing is a tactic under which the service charges more for its offer when compared to the competition. According to Huseyin and Topaloglu (2019), the best way of selecting a pricing model is to base it on concrete data, for example, about demand. However, in many cases, there is not enough information about the potential demand because the product is new to the market. This is the case with this new online platform since although there is competition from major online learning sites, none of them focuses on one type of degree. The pricing for this new development, therefore, will be based on the data about edX and Coursera, as well as some assumptions about the target audience.

The previous parts of the thesis assignment show that the average prices for a degree program offered by edX and Coursera are between $447 and $1344. The variance is attributed to the type of degree, duration of the program, and a number of academic credits. The comparable program titled “Computer Science Fundamentals” offered by edX in partnership with NYU costs $447 per six months of studies. Since the new platform will offer more support and cooperation between educators and learners, the duration of the program should be longer, for example, one year, and the price should be set higher to account for the additional benefits a learner will access. The price point for this product is at $2000 per course program that will provide a learner with a degree at the end of their studies.

Pricing Strategy

The justification for the premium pricing is the demand for computer science degrees, the high salary of these specialists upon graduation, and the additional services that the new platform will offer to its consumers. According to the US National Bureau of Labor and Statistics, the demand for employees in the computer science field will increase by 13% until 2026 (as cited in “Are computer science jobs in demand? ” n.d.). Moreover, the global shortage of skilled workers in this field was estimated at 1.1 million people in 2020. This deficit will continue to increase, which implies that the demand for degrees in computer science will be popular among learners as well.

Under premium pricing, the service charges more when compared to its competition, allowing for higher margins. According to Simon and Fassnacht (2019), premium pricing is a solid strategy for companies that have a strong competitive advantage. In the case of this platform, the advantage is evident since the vast majority of the learners partaking in an online course never finish it, and only 10% succeed, as was discussed previously. This platform will help learners complete their degrees because they will communicate with their educators and support staff and will be engaged in learning through homework. Hence, the learners will pay a premium for a better studying experience, apart from the high-quality knowledge they will receive.

Finally, premium pricing implies that the targeted audience is not a mass market. With Massive Open Online Courses (MOOC) such as Coursera and edX, the target audience is broad. For this new platform, since the focus is narrower and the courses will be suitable only for people interested in computer sciences, the service is more niche. In the case of MOOCs, economical pricing is justifiable because the profit is reached through low margins and a large number of participants (Simon & Fassnacht, 2019). With a niche service, the profit can be reached by having higher prices.

Objectives

The premium pricing aims to allow the platform to have distinctive features that are an evident advantage when compared to the competition. Premium also allows spending enough on overhead costs, including marketing and sales (Simon & Fassnacht, 2019). This is because the profit margin is sufficient. Finally, this approach allows maximizing short-run profits and monetary sales, which will be necessary to cover the investment in technology and marketing. The objectives of the pricing strategy are:

• Provide a higher quality of learning experiences
• Allow students to communicate with their professors
• Integrate technology that makes the studies easier
• Provide technical support to students
• Review homework and conduct tests
• Work in partnership with a University that will issue a degree
• Account for the investment in technology and marketing
• Obtain high-profit margins

Marketing Activities

Since this is an online learning platform, the majority of marketing activities will be online. Apart from social media and targeted advertising, it is vital to raise awareness about this service through educational videos, which will help the viewers understand the purpose and benefits of this learning platform. Youtube, for example, has a plethora of “study with me” or “how I became a programmer” videos. Partnerships with people who upload this content can help raise awareness about this platform among the audiences interested in learning about computer science. For example, the individuals who routinely upload videos showing how they study computer science have the credibility and trust of the audience and can become brand ambassadors for this new platform.

Apart from this, it is vital to utilize social media marketing, including content for blogs and social media posts. These posts will help learners get familiar with the platform and will include tips on how to study. Finally, offline marketing should be used, for example, billboard advertisements and meetings at high schools. Below is the list of offline and online marketing activities that will be a part of promoting the new online learning platform:

• Content creation for the blog and social media accounts
• Targeted ads
• Partnership with Youtubers who have learning-oriented channels
• Offline meetings in highschools
• Billboard ads

One Year Calendar

This calendar presented as Table 1 shows the dates and marketing activities plan of execution. At the initial stages, the website, blog, and social media accounts should be filled with content, such as texts, photos, and videos. The blog and website content have to be optimized according to SEO standards, which will allow receiving organic traffic (Papagiannis, 2020). The targeted advertisement should be campaign should be launched in March because, by this time, the social media accounts and blog will have enough content to not appear black and unuseful to potential customers. The initial marketing campaigns will allow to test the platform and attract learners for the term starting in March. This is why billboards and highschool meetings will be important before the March term as they will allow familiarise the students with the learning platform’s brand.

Subsequent activities will focus on attracting learners for the September semester and will include feedback and content with the initial group of learners. Due to the fact that the first group will be a test for the platform, the company should offer a 20% discount, which should also attract users since this platform is new. These students will be asked to participate in the creation of video content, for example, to discuss their experience and to film “study with me” videos with Youtube influencers. Notably, when selecting influencers for partnership, it is best to choose people who have less than 1 million followers, the macro and micro influences (Alassani & Göretz, 2019). These individuals have more trust and typically create content in one niche.

Table 1. Marketing activities calendar (created by the author).

Budget

The budget for the launch and two marketing campaigns targeted towards two semesters, Spring and Ayuterm, will cost the business approximately $27,000. Table 2 is the budget for these marketing activities based on findings from open sources and estimations. The majority of the spending is allocated to the Youtube influencers because the company will be able to build its brand using the trust and engagement of followers that these influencers already have.

Table 2. Online learning platform marketing budget (created by the author).

Summary

In conclusion, this paper addresses the pricing of the new learning platform for Computer Science studies. This platform will apply a premium strategy because it will offer features and study practices that competitors do not have. With this approach, the company will have higher margins, obtaining more short-term profits. Additionally, high margins will allow spending enough on marketing activities and other overhead costs. In total, the marketing budget for a year is $27,000.

References

Alassani R. & Göretz J. (2019) Product placements by micro and macro influencers on Instagram. In G. Meiselwitz (Ed.), Social computing and social media (pp. 15-20). Springer.

Are computer science jobs in demand. (n.d.). Web.

Gallego G. & Topaloglu H. (2019). Online learning. Revenue management and pricing analytics. International Series in Operations Research & Management Science, 279, 275-289. Web.

Papagiannis, N. (2020). Effective SEO and content marketing. Wiley.

Simon, H. & Fassnacht, F. (2019). Price management: strategy, analysis, decision, implementation. Springer.

The choice of a pricing strategy is essential for optimizing sales and shaping the profitability of a product by manipulating its value both upwards and downwards. It is vital to consider that products undergo periods of growth, maturity, and eventual deterioration. Understanding market needs and the life cycle of a product is critical in determining pricing and fine-tuning business strategies (Kienzler & Kowalkowski, 2017). The development stages of a product entail four distinct phases, namely, introduction, growth, maturity, and decline. During the introduction phase, marketers project low sales volumes, higher costs per unit, and minimal profitability (Kienzler & Kowalkowski, 2017). In the growth phase, the sales begin to increase, lowering costs per unit, and boosting profits. At the maturity level, maximum sales are realized, and the prices for customers plummet tremendously (Kotler, 2016). Lastly, the decline phase is characterized by decreasing sales from the peak. Costs remain low for consumers, while profits start to fall.

In the context of marketing bicycles, the focus is on adopting a new technology of material and 3-D printing. The most effective strategy is market skimming since it will lead to the realization of quick results considering this position. This approach is perceived as optimal since a production volume cost does not reduce profitability. The pricing strategy not only features the quality of the product but also inhibits new players from entering the market (Kotler, 2016). The product’s lifecycle experiences constant adjustments in pricing to counter competitive forces. However, the market-skimming strategy does guarantee market stability. As a result, a transparent pricing strategy is essential in winning and retaining consumers in the long term. Customers are often fascinated by the knowledge of products and the organizations that manufacture and distribute them. Thus, the pricing strategy should be addressed vividly from the inception of the product and throughout its other stages of growth to create confidence in consumers.

References

Kotler, P. (2016). A framework for marketing management. Pearson Education Limited.

Kienzler, M., & Kowalkowski, C. (2017). Pricing strategy: a review of 22 years of marketing research. Journal of Business Research, 78, 101-110.

Companies can use different pricing strategies to attract customers and keep them invested in the business. For some, competitive pricing appears to be the best option because it capitalizes on people’s desire to save money. However, this approach is not always practical, as many consumers are willing to pay more for special treatment, comfort, or additional features. According to Mohammed (2018), many organizations can benefit from implementing a Good-Better-Best pricing model. This strategy offers several product or service tiers, each containing more features than the last. The idea of this model is that most customers are willing to pay more for a product to not trade down for a less appealing version. This strategy can be used for online and mobile-based applications, which often already have some tiers. For instance, such apps as Ten Percent Happier may benefit from changing their approach to a Good-Better-Best model.

Currently, the app Ten Percent Happier operates using a freemium model. It has two tiers – a free version with limited features – and a premium subscription that gives users full access to its library of sounds, guided meditations, challenges, and podcasts (Ten Percent Happier, 2022). While this strategy may be attractive to customers, it lacks variety. This may make many clients hesitant to choose the premium version over the free one. Thus, the inclusion of the Good-Better-Best model has to focus on finding which features of the current premium model can convince not paying users to upgrade. It is vital to note that the free version of the app cannot be removed to keep an option for users who want to download and try out the application without committing to it. It can be viewed as the “Good” part of the strategy, although it brings revenue only through advertising.

The “Better” option has to include some features that the customers deem necessary. For many, advertising-free meditations and podcasts and more choices of meditation exercises and sounds can become the basis of this package. Therefore, the “Better” version of the app should include everything free users can access, such as the main meditation course, the weekly newsletter, and a one free meditation challenge. Next, the company can add a range of other meditations and a small number of challenges that can be opened at specific periods. This tier should also allow customers to listen to all products without ads – a feature many users will likely want.

Finally, the “Best” version should focus on building a personal connection with the user to increase their feelings of comfort and exclusivity. At the moment, the premium feature includes meditation courses with experts. This service can become a part of the “Best” tier, and the organization can add regular posts from these experts or an ability to ask them questions to be answered in a premium newsletter or blog post. These options will create a channel between the company and the customer and establish a relationship where users can gain more from a more expensive subscription. Furthermore, the users will be able to choose from all existing meditations and participate in challenges regardless of the time limit.

The Good-Better-Best approach can improve the freemium model used by many companies creating mobile applications. Such apps as Ten Percent Happier have a simple tier spectrum that includes a free and a paid version. This model attracts consumers but keeps many of them reluctant to pay. A new strategy that adds more tiers keeps some of the best features – such as the lack of advertising and more choice options – in the “Better” option while presenting different experiences at all tiers.

References

Mohammed, R. (2018). The good-better-best approach to pricing. Harvard Business Review, 96(5), 106-115.

Ten Percent Happier. (2022). Membership. Web.

Introduction

A pricing strategy is one of the essential aspects of marketing. It can work towards the success or the failure of an organisation. That is why marketing managers need to take time to analyse the issues relating to the pricing strategy before incorporating it. In the venture of launching the product in the U.S market, there are various issues that have to be considered and planned before hand.

One of these aspects includes a pricing strategy for the traditional vegetables. This also includes the pricing tactics that have to be incorporated in the marketing process. Legal and ethical aspects of marketing also have to be strictly adhered to. This paper also deals with the distribution channel for this product and how the channel is suitable for the product. (Baker, 2000)

Pricing strategy

In such a situation, the product is still very new in the market. In this case the right pricing strategy has to be used. When a product is still new in the market, the pricing has to be a bit lower than that of its competitors. This helps in the sense that consumers can easily try out the product because it is a bit cheaper. (Brassington and Pettitt, 2006)

It gives the consumers and customers an opportunity to try out the new product. The pricing should just be slightly lower than the competitor products. This pricing strategy will help to attract new customers to try out the dried traditional vegetables from Africa. The best strategy to use for marketing the traditional vegetables is penetration pricing. It is quite imperative to consider the target customers for the product.

As earlier on illustrated, the target customers for this product are the elderly and the sick. This group of people are mostly not active and a large percentage of these customers do not work. This means that they can be classified under the low income in the society. (Blythe, 2001)

This therefore implies that the pricing strategy has to be slightly lower so that they can also easily afford the product as it gets through the launching process in the United States’ market. Through penetration pricing, sales volumes and generally the market share will be increased. This will also discourage competitors who may want to deal in the same product. (Brassington and Pettitt, 2006)

Determination of pricing tactics

There are diverse pricing tactics that can be used in marketing traditional vegetables in United States. These include product line pricing, value pricing, differential pricing, or competing against private brands. After analysing all the above tactics, the product line pricing tactic was considered the best for incorporation in marketing this product in United States.

In the product line pricing, there are different forms that can be incorporated. One of them is the vertical product line pricing. This is whereby the price is set basing on how much customers can pay for quality. In this case, the traditional vegetables will be subdivided into three groups. That is the general, medium and high quality. (Brassington and Pettitt, 2006)

The price will then be set for the three categories considering the much that customers can pay for each group. There are various aspects of quality that will be considered. Horizontal aspects of product line pricing will also be considered. This is considering the fact that people like variety. This will bring in the aspects of flavour, scent and colour etc.

It is known that the traditional vegetables from Africa have different tastes and flavours and sometimes colour depending on the place where they are sourced. These aspects of the product will therefore be used to incorporate the horizontal product line pricing (Dibb, 2000)

Legal and ethical issues related to the pricing tactics

Pricing strategies are quite essential in marketing strategies of any product. The pricing strategy and tactics however have to adhere to the legal and ethical standards. The pricing strategy used in marketing always determines the future of the product and Company at large. The pricing tactic has to adhere to the competition Act found in United States. The way the price is communicated should adhere to the marketing laws in the nation. (Brassington and Pettitt, 2006)

Some of the ethical issues to consider relates to the effect of the pricing strategy on competition. The pricing strategy should not be too low such that the other competitor products would be highly disadvantaged. It is also quite ethical to consider the effect of the pricing tactic to the profitability of the Company.

The pricing strategy of traditional vegetables should not eventually lead to losses. The pricing strategy should also not be too high in such a way that is unfair to the customers. This is where the pricing tactic does not in any way relate to the ultimate value delivered to the customer.

Marketing distribution channel analysis

It is also essential to consider the marketing distribution channels for this product. In the venture to ensure that the target customers in United States access the vegetables, wholesaler to retailer then to the customer channel would be used. The wholesalers would be based in Africa and U.S.

They would get the dried traditional vegetables and directly send them to retail outlets. Wholesalers will easily be identified both in Africa and United states. All the wholesalers for this product will be identified online. The retail outlets will also be identified online and these are specifically those that deal with similar products. (Brassington and Pettitt, 2006)

Distribution strategy fits the product and overall marketing objectives

This distribution strategy highly suits the product to be launched in the U.S market. This is considering the fact that the dried traditional vegetables do not lose their nutritional value when they stay for a longer time. They can also take quite a long time before expiry as compared to the traditional vegetables.

This therefore shows that the channel of distribution best suits the product. The channel also suits the product since the final price would be quite affordable to the target group of customers. A longer channel of distribution results in high prices for the products. The overall marketing objective is to ensure that customers get to know about the new product, it will deliver quality for the benefit of the customers and the Company. (Palmer, 2004)

Conclusion

In conclusion, traditional vegetables are not easily accessible in United States. This unique product would help solve health problems found in the nation. Penetration pricing would be incorporated since the product is new in the market. Product line pricing tactic would also be used to reach the target population.

The distribution channel for this product would be manufacturer-wholesaler-retailer to consumer. This channel suits the product as it is not highly perishable. The overall marketing objective is to make the Company and products known in the market to the benefit of the customers and the organisation.

References

Baker, M. (2000): Marketing Management and Strategy; 3rd edition; New York; Macmillan Business

Blythe, J. (2001): Essentials of Marketing; 2nd edition, New York; Prentice Hall

Brassington, F. and Pettitt, S. (2006): Principles of marketing; 4th edition; Harlow; Prentice Hall

Dibb, M. (2000): Marketing Management and Strategy, 3rd edition: London. Macmillan Business

Palmer, A. (2004): Introduction to Marketing: Theory and practice, Oxford: Oxford University Press

The scandal connected to Mylan and EpiPen’s pricing was caused by recurrent price increases imposed by the company. This had a serious impact on the market and on the people who needed EpiPen the most but could not afford it due to a sky-high price. The public outburst made the company review its pricing policy, but the way in which the company managed its marketing, financial, and pricing approaches is exceptional. The current paper explores the strategies that were adopted by the company and provides a critique of their perilous elements. The analysis is based on the factual data and reflects the premises that led to the transformation of Mylan into an undisputed leader and authoritarian pharmaceutical company. Regardless, this severe approach became both a strength and a weakness for the company, and this will be discussed further in the paper.

When it comes to marketing, the acquisition of EpiPen by Mylan became one of the key events in the history of the company. Before this, the company did not represent a serious threat to the market, and its approaches were relatively generic. According to the case study, Mylan managed to win over the market and make the most out of their children-focused strategy (3). In addition to this, the company exploited the healthcare legislation and bypassed several limitations that were not provided by the existing laws. Another important fact is that the company made the best use of the DTCPA (Direct-to-Consumer Pharmaceutical Advertising) and naturally eliminated numerous medics out of the medication prescription equation. As it is accurately highlighted in the case study, Mylan spent huge amounts of money to promote its newly acquired product regardless of the controversy and mistrust (4). If we connect this to the company’s marketing strategy, we will be able to see that Mylan’s brand image was critically influenced by their approach to business.

Nonetheless, Mylan was able to evade the pitfalls in the form of popular hatred and disrespect from other pharmacological companies. Another definitive characteristic of the marketing strategy of the company is that Mylan was able to increase the price almost 20 times during the nine-year acquisition period. These increases were implemented in a constant, even oppressive manner with the intention of subduing the market. To say the least, the company was able not only to increase the price but also the frequency of price increases. Single leadership led to the monopolization of the production of EpiPen and the establishment of an in-house marketing campaign. Moreover, as mentioned in the case study, one of the key advantages of Mylan was that they had almost no competitors (4). This allowed the company to increase the price painlessly as they knew that the public will still purchase their product regardless of the price. Moreover, despite the hatred, Mylan still boasted an extensive portfolio of medications and manifested a strong presence in a rather large number of countries all over the world.

Also, the fact that the company did not have serious competitors positively impacted their financial status. All interest from sales went to Mylan, and nobody could interfere with it. Most competitors were eliminated because of non-sterile products. Their generic production was of decent quality, but it did not stand any competition with Mylan’s EpiPen. There were several companies that could pose a threat to Mylan, but they did not have enough power and acceptance of competing with the pharmaceutical mogul. Nonetheless, according to the case study, the competitors that managed to survive were ignored by the customers due to the fact that the former used a different design of the applicator (4). This critical difference between the EpiPen and its replicas put Mylan on top of the financial charts. The company challenged the applications of other companies and remained the only company to produce epinephrine injectors.

The results of the case study showed that Mylan became a successful monopoly and held more than 90% of unit sales (4). It is hard to believe, but due to its highly-qualified employees, the company was able not only to improve its position in the market but also to succeed financially despite various obstacles. The financial strategy of the company was based on constant acquisitions of the most promising rivals. This strategy extended to the companies outside the United States as well. One of the businesses was even located in the Netherlands. As claimed by the authors of the case study, Mylan switched to the Dutch business environment because it featured lower taxes and a corporate governance regime that was rather responsive to the management of the company (5). The so-called tax evasion was accomplished by means of complex manipulations with the laws, but the company succeeded. This corporate inversion perfectly reflects the aggressive approach that was developed and adopted by the CEO of Mylan. In the face of its visible stringency and irrationality, the financial strategy of the company became its bargaining chip.

Even though the changes were considered unpatriotic by the customers, the company was able to experience significant output growth and did not hesitate to raise the price, considering the fact that it did not have any rivals. This business outlook perfectly combines with the financial and marketing strategies that were mentioned earlier. Moreover, despite corporate inversion being rather common nowadays, Mylan was largely criticized for not paying its share to the US budget. Interestingly, this did not affect Mylan, and the company is still at the top of the charts. Expiring patents and pending litigations slowed the company, but the company’s management is steadily driving its own line and does not pay attention to low-arching risk probabilities. According to the case study, the pricing strategy of the company was largely influenced by the supply chain and its complexity (7).

Its vertical directivity is one of the key strengths of Mylan that support the current approach to the pricing strategy. On a bigger scale, the company ignored the rest of the market and was adamant about the pricing policy. This became one of the reasons why Mylan currently has so many loyal followers and ardent haters at the same time. Ultimately, this led to a situation where price increases were no longer justified, and the company prioritized its profits over the customers’ needs. In the future, Mylan may encounter a situation where it will be oppressed by specific government regulations. Besides, the company’s pricing strategy will be affected significantly if it loses the majority of its patents on a variety of medications. Based on the information discussed above, I can conclude that regardless of the communal dislike, the company manages to evade business obstacles and stay afloat efficiently. Within the current business environment, such an approach of the CEO of Mylan can be regarded as a skillful manipulation of existing legislation and available resources.

Zalora is a global fashion group that operates online and has been regarded as one of the most growing brands in an emerging market. The fashion e-store has been working towards superseding all the other online fashion companies. The main pillar is the fashion industry in Asian countries such as Thailand, with the ecommerce industry worth approximately $3 billion (Sakawee, 2014). The price strategy of Zalora is premium pricing and competition-based pricing models since the firm focuses on trending fashion items. The strategies improve the firm’s profitability by increasing market penetration using mobility.

The premium pricing strategy is incorporated with other sub-strategies, such as providing many consumer options, having an offline store, and focusing on a mobile e-store (Sakawee, 2014). In this case, the company’s price is higher than that of the competitors meaning that the firm will employ a study to monitor the market price levels. Zalora argues that their designs are significantly of higher quality than the other online and offline shops. Therefore, price discrimination is felt at two degrees for the company to influence the customer in the market (Pradana & Novitasari, 2017). First, there is a second degree in marketing where Zalora charges a different price for specific quantities, for instance, quantity discount for bulk purchases referred to as bundling in marketing.

Secondly, the company has a third-degree price factor where it charges a different price to different consumer groups after buying from the store, hence, the occurrence of tying in marketing. For example, Zalora offers a higher price when selling fashion items using the Ezra label, 7-11 pick-ups, and pop-up stores. Furthermore, versioning occurs in Puma shoes are sold at a different price in Malayisa depending on the purpose of the consumer, as shown in Figure 1 below (Sakawee, 2014). The price is increased for these cases due to the convenience it has and the feeling of differentiation in terms of delivery of quality products. Third-degree pricing is evident when selling the Ezra-labelled designs that celebrities and influencers desire in their wardrobes. Zalora has various models as of 2021, which have been offered at different prices depending on business tastes (Pradana & Novitasari, 2017). An example is Alicia Amin, Natalie Prabha, and Eileen Yong, which have been sold differently depending on the preferential aspects of the customer experiences.

The various strategies discussed above have a significant boost in Zalora’s total revenue and profit. First, there has been a competitive advantage where consumers feel that Zalora’s products are of higher quality, leading to increased sales and higher returns on investment. When the returns are high, profitability is realized after deducting costs from the total revenue earned (Ong, 2020). For example, through the mobile e-store strategy, Zalora has witnessed a shift to increased users through messaging app Line. In Thailand, there are 24 million users and 400 million in terms of global view (Sakawee, 2014). The premium pricing is received with a positive reaction as many buyers want to have an item from the store, contributing to the increased revenue for the company.

The rise in revenue has been possible due to the Ezra label and 7-11 pick-ups. These strategies in Southeast Asia have been reported to have taken the company to another level of volume as sales. Through the addition of buyers in the stores, the company has witnessed a whopping 36.3% rise in revenue as of 2021, which translates to $512.73 million (Sakawee, 2014). Pricing discrimination discussed above focuses on adding value to the company’s products, meaning demand increases, which translates to significant revenue, as shown in Figure 2 below. The curve goes upward to the right, meaning that Zalora’s revenue has increased due to the increase in the number of items demanded due to its pricing strategies (Ong, 2020). Additionally, when the price is higher, consumers perceive the products as high quality; hence, they buy them in high quantity.

References

Ong, H. (2020). Retail strategies used by Zalora Philippines to overcome e-commerce challenges.Financial Adviser.

Pradana, M., & Novitasari, F. (2017). Gap analysis of Zalora online application: Indonesian users. International Journal of Learning and Change, 9(3), 1.

Sakawee, S. (2014). Tech in Asia – Connecting Asia’s startup ecosystem. Techinasia.com. Web.

Zalora Malaysia. Zalora. (2022).

Abstract

A market structure is a tool used to determine the pricing power of certain products in diverse firms. Research has shown that there are numerous market structures with unique pricing strategies in place. The price of goods and services in a firm depend on the levels of demand, cost conditions and competition.

Besides, price fixation is one of the key managerial functions. It is frequently reviewed to ensure that a firm makes a reasonable profit margin. The market conditions determine the type of market structure and pricing criteria to be used in a particular firm. Moreover, businesses cannot operate in isolation.

In other words, a firm requires a robust marketing platform for it to operate effectively. Hence, it is important to select an appropriate market structure for a business to make significant returns. Economists have identified four major market structures that are unique in terms of both operation and effectiveness in meeting the demands of customer. The market structures have been discussed in this paper in relation to pricing strategies.

Introduction

A market structure can be defined as a core characteristic that makes up a platform for buying and selling goods and services (Samuelson & Marks, 2006). It is common knowledge that a market exists when there are buyers, sellers, products, competition, product differentiation as well as the ease of entry or exit.

From this definition, Rubin and Dnes (2010) highlight that market structures are individual aspects that influence the behavior of buyers and sellers. Ellickson, Misra and Nair (2012) also define a market structure as the number of firms in a market that are able to produce similar goods or services. The nature of a market structure greatly influences the behavior of producers.

Therefore, it affects the market price of a particular commodity or service (Rubin & Dnes, 2010). In addition, a market environment affects the supply of commodities and equally creates barriers for entry. This paper discusses some of the notable market structure by analyzing their pricing strategies alongside relevant examples.

Perfect Competition

Description

This describes a situation whereby a firm does not have a particular independent pricing policy. Therefore, firms that embrace this market structure have to comply with the prevailing market prices (Samuelson & Marks, 2006). At this point, a firm is at liberty to market its goods and services.

Lack of control over a market often creates an open platform for buyers to choose less costly products. If a firm sets very high prices in a marketplace, it might end up making few or no sale at all. It is important to note that in this type of a market structure, there is no specified price for certain quality or quantity of goods (Rubin & Dnes, 2010).

Therefore, it is upon the seller to decide which quantity to offer and at what price. Typical firms have no influence over demand and supply because new sellers enter the market as they wish. Ellickson et al (2012) assert that typical competitors in such a market end up earning no profit at all. Rubin and Dnes (2010) point out that there are no barriers to enter or exit such a market structure since there are unlimited number of both sellers and buyers.

From an economic perspective, this market structure exists when firms produce similar and standardized products. It implies that different firms only compete for prices. Moreover, buyers are aware that price competition exists. Therefore, all the available products must be sold at a common or poplar market price (Rubin & Dnes, 2010).

Both consumers and firms also tend to countercheck the price even though they have no direct influence on the market. In order for a firm to maintain its customers, it is compelled to sell either at the prevailing market price or at a lower price altogether (Samuelson & Marks, 2006). Therefore, firms end up selling a small proportion of their total output.

Pricing Strategies

Prices are determined by the forces of supply and demand. It is worth to note that there is perfect substitution where all firms produce homogenous, standardized and undifferentiated products. At this point, the demand curve in each firm is perfectly elastic and horizontal to the price line (Rubin & Dnes, 2010).

This implies that a firm can only sell some of its output without altering the price. Any slight increase in price results into lack of sales since buyers tend to resort to a substitute from other competitors. In this type of a market structure, the “law of one price” does not change and all market transactions are done at the same price (Samuelson & Marks, 2006).

Monopolistic competition

Description

In this type of a market structure, a firm ignores a market price and sets it own pricing without considering the causal effects of other firms with different prices. In this case, a group of producers offer a common product that is not identical. Therefore, it triggers competition.

Firms deliberately differentiate their products and set prices that are competitive in nature (Samuelson & Marks, 2006). It is important to note that there are no market barriers. Monopolistic competition resembles a perfect competition model except that the products of the former are different.

Pricing Strategies

Firms set their own prices that are different from those of competitors since products sold are also differentiated in terms of quality and quantity. In this case, firms aim to create brand names by reinforcing product differences (Rubin & Dnes, 2010).

Product differentiation is one of the strategies that enable producers to set high prices without necessarily losing market dominance to competitors. It is worth to note that the demand is elastic hence; firms can increase their prices whenever they wish to do so (Samuelson & Marks, 2006).

Oligopoly

Description

In this case, about three sellers occupy a larger share in a particular market. The firms may experience price wars as they compete against each other for maximum gains. Increasing prices affects the volume of sales of other firms (Ellickson et al., 2012). For instance, when one of the competing firms increases its market prices, consumers will obviously buy from the competitors.

Therefore, producers must assess the impacts of their decisions in order to decrease or increase prices. It is worth to note that few sellers in the market may be rivals. This may eventually lead to conflict (Samuelson & Marks, 2006). However, there is great ease of entry into the market unlike the case with a monopolistic structure.

Pricing Strategies

Sellers first understand the behavior of consumers before setting prices. The pricing policy of an individual producer affects others. Therefore, there is an element of price rigidity that compels producers to opt for non-price competition (Samuelson & Marks, 2006). At this point, prices are no longer depicted by demand and supply.

Prices are set after critical, interactive and strategic thinking (Samuelson & Marks, 2006). The fate of oligopoly pricing strategy is interdependent even though it is determined by economic factors such as consumers’ tastes and preferences.

Monopoly

Description

This refers to a market structure whereby there is only one seller of a particular product. In other words, a single firm in the market offers goods or services to consumers. Nonetheless, pure monopolies are rare. From the statistical review of literature, it is evident that a monopolistic market generates approximately 3% of the gross domestic product (GDP) in the developed economies such as the US and UK (Samuelson & Marks, 2006).

Hence, monopoly exists when 90% of the market is dominated by a single firm. Rubin and Dnes (2010) elucidate that barriers to market entry are common in this type of market structure. This is a precondition that is deliberately set to prevent other firms from venturing into the market (Rubin & Dnes, 2010). Furthermore, there are no perfect substitutes. Consumers have no choices to make since they have to buy products available in the market.

Pricing Strategies

Prices of goods and services are determined by single players in this type of a market structure. Most monopolists use trial and error method when pricing their products. Ellickson et al (2012) argue that monopolists also determine prices by balances profits and losses.

When a firm reaches an equilibrium point where marginal costs are in the same level with marginal returns, monopolists decide their best market price (Samuelson & Marks, 2006). Usually, monopolists set higher prices that generate maximum gains. However, a firm may differentiate prices for various buyers in diverse regions. The price differentiation approach depends on the elasticity of demand.

Dumping is also a pricing strategy used by monopolists (Rubin & Dnes, 2010). In this regard, products fetch higher prices at the domestic market than in the international platform. However, monopolists do not just escalate prices. In other words, the optimal price is influenced by demand (Ellickson et al., 2012).

Case Study with examples

In the last few years, intense competition has been witnessed among telecommunication companies that supply cables, satellites and other communication services. Broadcasting networks have also exercised perfect competition for several decades. Internet service providers and social media platforms such as Facebook, Twitter, Instagram and Google plus have thrived in perfect competition (Samuelson & Marks, 2006).

This has greatly encouraged other service providers to venture into the market. Besides, firms that produce and sell foodstuffs such as fast food restaurants and supermarket outlets exercise monopolistic competition. These sellers produce diverse brands that appeal to the larger market niche (Samuelson & Marks, 2006).

The deregulation of products’ varieties and discounts gives clients the freedom to purchase goods or services that they can afford. In the United States, there are limited number of organizations that offer similar services and products. For instance, the Airbus and Boeing companies are renowned aircraft companies that compete against each other (Samuelson & Marks, 2006).

There are also hybrid automobiles that compete with traditional gasoline-powered automobiles. World-renowned soft drink companies such as Coca Cola and Pespi compete through pricing strategies thereby making the market to be oligopolistic in nature (Samuelson & Marks, 2006).

Some countries such as the US and India give firms and business people exclusive rights to sell their inventions for a specified period. Therefore, some firms have patents that grant them authority to sell their products for a period of 10 years (Samuelson & Marks, 2006). This prevents other people from copying, processing or applying such ideas.

A good example is the Microsoft Company that deals with computer software. It spearheads monopoly by preventing the entry of other compute software companies into the market (Samuelson & Marks, 2006). Governments have been known to allow lawful monopolies for a given length of time.

Conclusion

From the above discussion, it is explicit that a market environment influences pricing strategies. There are four major market structures. These market structures have diverse attributes such as the degree of barrier to market access, the extent to which a firm controls the price, and the number of sellers.

In monopolistic and perfect competition, there are numerous sellers hence there is no entry barrier into the market. Therefore, producers set prices that are influenced by elasticity of demand. In oligopoly, there are a few sellers competing against each other and prices are determined by other economic factors apart from demand and supply.

There are significant but less prohibitive market barriers and price rigidity in oligopolistic markets. Contrastingly, a monopoly has a single firm supplying and determining the price of products in a market. There are numerous barriers that prevent other potential sellers from entering a monopolistic market.

References

Ellickson, P. B., Misra, S., & Nair, H. S. (2012). Repositioning Dynamics and Pricing Strategy. Journal of Marketing Research (JMR), 49(6), 750-772.

Rubin, P. H., & Dnes, A. W. (2010). Managerial economics: a forward looking assessment. Managerial & Decision Economics, 31(8), 497-501.

Samuelson, W., & Marks, S. G. (2006). Managerial economics. Boston: John Wiley & Sons, Inc.

The current pricing and promotion strategy of Nespresso coffee machines and coffee pods present a unique topic, the study of which can provide important information about modern customers’ demands and the importance of value proposition. Furthermore, it is also worth mentioning that several parties are involved in the production and distribution process, but ultimately Nestlé benefits the most through selling coffee capsules. Therefore, a carefully designed pricing and promotion strategy is the main reason for the Nespresso brand’s success in the market.

Firstly, considering the pricing strategy, it was important for the brand to get more people to buy coffee machines to ultimately benefit from the sale of capsules. For this purpose, Nestlé signed an agreement with a major manufacturer of quality coffee machines, Krups. Krups, Philip, and Turmix, are currently engaged in producing and maintaining Nespresso coffee machines, which allows the company to sell expensive coffee machines at a low price (Heed, 2022). Furthermore, while Nespresso pods cost more than ground coffee and coffee beans, the variety of different kinds of coffee and the easier process of making provide customers with more value (Marshall, 2022). According to Cheng (2018), the association of Nespresso products with the premium segment is vital in competition with other coffee capsule manufacturers and helps justify the high price of individual capsules. Therefore, the pricing strategy allows the company to gain advantages over standard coffee products and other brands of coffee capsules.

Furthermore, Nespresso strengthens the pricing policy through an innovative approach to promotion. For example, the price of the espresso machine can be reduced to 1$ for the customers subscribing to a yearly supply of capsules (Nespresso, 2022). Moreover, as coffee capsules have a long shelf life and extended product life cycle, Nespresso trusts distributors to conduct promotions, meaning that customers can always find good deals to buy Nespresso machines and capsules. For example, buying an espresso machine can give customers a coupon for a retailer’s gift certificate (TheFreebieGuy, 2022). Lastly, Nespresso also produces limited-edition coffee capsules, increasing regular customers’ interest.

In conclusion, the essay defined that the current pricing and promotion strategy of Nespresso coffee machines and coffee pods is unique and allows the company to lead in the field of coffee capsules. The competitive pricing policy and high-quality products allowed the brand to gain a good reputation among customers. The promotion strategy focuses on giving the client opportunities to try more of the company’s products and services.

References

Cheng, E. (2018). Nespresso and pricing power. LinkedIn. Web.

Heed. (2022). Sales strategy: Nespresso case study. Web.

Marshall, D. (2022). Nespresso cost per pod: The cost of Nespresso pods vs. beans. Latte Love Brew. Web.

Nespresso. (2022). Nespresso subscription benefits. Web.

TheFreebieGuy. (2022). Target: Nespresso VertuoPlus only $124.99 after $25 Targetg Gift card (Reg. $200). Web.