Good Essay About The Marketing Mix: Price
The price value is enormous: it defines the structure and volume of production, the movement of material flows, commodity mass distribution; has an impact on a lot of profits, product profitability and production, the level of life society. Using price inputs and outputs of business are measured, most advantageous embodiments of the capital investment are justified economically, and the production and consumption are stimulated, as well as the quality of the goods (NetMBA, n. d.).
Pricing process should clearly regulate the stages of collecting and preparing the information, making a final decision. Its effectiveness depends on the actual development of methods to collect and verify information about competitors, observation of consumer behavior, and analysis of the results of internal activity (An Overview of The
Pricing Process, n. d.). General policy creates common approaches in pricing of the company that determine the choice of applied marketing pricing model, i.e., pricing strategy. Ability to optimize pricing policy is a variation of different pricing strategies and methods, depending on the current conditions in a particular market. Thus, determining the price and strategy for a particular product in a particular market, it is necessary to rely on the existing pricing policy, which should not have strict time frame of short and long term periods. Pricing strategy is possible level, direction, speed and frequency of price changes in accordance with market objectives of commercial enterprise (An Overview of The
Pricing Process, n. d.).
Media Distributor – Netflix
Netflix is a huge media library of various TV series, movies and TV shows, offering the opportunity to watch favorite TV shows for its users anywhere and at any time. All that is required from the customer is to carry the gadget with display and buy subscription plan. The service of streaming media is the undisputed leader in the world market and competes with the most popular broadcasters, unconditionally defeating giants of traditional broadcasting.
Tariff plans of Netflix clearly show the target audience, what they pay for and what they get – the more users will simultaneously use online TV, using a single account, the smaller the cost of subscription for each service recipient will be (starting from $7.99 per user and ending $11.99 for four). In this way, Netflix tries to meet the needs of different types of users and develops the most attractive for the customer rate schedule (Netflix, 2014).
But in spite of all its power and popularity, Netflix was seriously affected by the decision taken in September 2011 by Reed Hastings, the executive director, on the division of home delivery DVD (a special kind of video, implemented through the postal service) and streaming video library into two different types of services, thereby forcing customers to pay separately for different types of service before entering into one tariff package.
The strategy of price discrimination can be suitable for the company. It is the sale of one product to different customers at different prices (depending on the time of use, type of consumer, etc.) or providing price incentives to some customers (Riley, 2012). Prerequisite application is the impossibility of free or no additional cost movement of goods from “cheap” market to “expensive” (geographic, social isolation). Netflix knows that offering several types of subscriptions, it will be able to interest several types of potential segments – some will prefer simple fare for a gadget, and for a very large family the plan that allows simultaneous use of 4 televisions would be ideal.
Aspirin – Bayer
Bayer is the German largest chemical and pharmaceutical group with core competencies in the world in areas such as health care, nutrition and high-tech materials. From the early stages of its development, Bayer actively implemented the offensive strategy, in particular geographic expansion. Creating a worldwide sales network was a decisive factor in the ongoing development of the company, as it was necessary to obtain access to foreign markets that is the main source of profit.
The development of pharmaceutical pricing policy framework includes an analysis of the factors influencing the activities of the organization, the state of the regulatory framework, the impact of government decisions in the area of pricing, pricing policy and competition and consumer laws governing their behavior. The strategy of “price stability” is the most appropriate for Bayer. It is constant for any changes in market conditions. The marketing goal is to use the existing position. Luxury price is set for the prestigious products, luxuries, companies’ goods of a special quality (Learn Marketing, n. d.). Bayer is aimed at buyers with high income, solid, for whom not only the quality of the product is important as its price, as use of the company’s products is in the range of attribute their viability and success. Therefore, the company has established for manufactured goods relatively high price and strives to keep it at that level. Bayer aspirin is 5 times more expensive than aspirin of other companies. To establish such prices, the company must be confident in the reputation of these products, and know exactly what analogs available on the market, do not have the qualities for which the consumer is willing to pay more.
Comparison of Strategies
Typical conditions of use of price discrimination strategy consider that the buyer is a regular, easily identified, the elasticity of demand for different consumers differ significantly; the product is a unique, having no equivalent substitutes; and the company is real or imaginary (in the representation of consumers) monopoly. The advantage of the strategy is the optimization of demand in the real world (Riley, 2012).
Typical conditions of use of price stability strategy consider that the buyer is a permanent and solid, conservative client for whom it is important to have price stability; the product is a prestigious, expensive; and the company is working in the industry, which is traditionally considered “indecent” frequent and sudden changes in prices. The advantage of the strategy is a high relative income (per unit of product). Disadvantage is that the company must have a permanent reserve to reduce costs as much as possible while maintaining the previous level of quality.
The establishment of the final level of prices is the most crucial moment in pricing. The company must take into account a number of aspects (NetMBA, n. d.). For example, the psychological perception of price by the buyer, his role is important, because buyers often align with the price index of goods as its quality, and can opt for a more expensive product as the best and prestigious. In conclusion, it is worth noting that, in deciding on the choice of a particular price level, it is advisable to rely on a few prices calculated for the same product (Learn Marketing, n. d.). This will assess the possibility of making a profit from different sides: on the basis of demand for the product, product quality, the perceived value of the product by the consumer, the level of production costs – and to choose the optimal level of prices in the current market situation.
After making the comparison it was found that both considered strategies have some similarities concerning customer, who is regular and permanent. As regards company operation and product, price discrimination and price stability differ totally.
An Overview of The Pricing Process (n. d.). Retrieved from http://www.thorogoodpublishing.co.uk/business/download/333
Learn Marketing (n. d.). The Marketing Mix: Pricing Strategies. Retrieved from http://www.learnmarketing.net/price.htm
Netflix (2014). Plans and Prices. Retrieved from http://www.netflixreview.com/netflix_plans.html
NetMBA (n. d.). Pricing Strategy. Retrieved from http://www.netmba.com/marketing/pricing/
Riley, G. (2012). Price Discrimination. Retrieved from http://tutor2u.net/economics/revision-notes/a2-micro-price-discrimination.html
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