Pricing strategies and decisionsPresentation Transcript
Lawrence McHale, Rafael Llewellyn-Thomas, Katie Murray, Joe Snowdon
Can you name some examples of “monopoly companies?” A monopoly company is where one supplier or company dominates the market. As a result of owning the majority of the market it can set a benchmark price at whatever it likes. When this happens the government steps in to disperse the power of the company by sometimes making it sell some of it’s assets .
Examples of monopoly companies: Here are some examples: Microsoft Intel Google
Pricing strategies, market share and competition
Market share Market share is a percentage of total sales volume in a market captured by a brand, product or a firm. This links to monopoly companies because they dominate chunks of the market until they own the majority of it, preventing other companies from competing.
Competition Competition is a contest between individuals, groups, businesses, animals, etc. for territory, a niche, or a location of resources. It arises whenever two or more parties strive for a goal which cannot be shared. For example businesses compete for customers, resources, and employees.
Sony and Microsoft Microsoft , Nintendo and Sony are in competition for customers to increase their sales so that they increase their profit, also known as a price war. Sony have started by lowering the prices of their console and creating “Playstation Move” which is a motion sensing controller that is detected by the “Playstation Eye Camera” for the Playstation 3. In return to this Microsoft have also lowered the price of their console and created “Kinect” for the Xbox 360 which is a sensor on the console which detects movement, spoken commands and presented objects or images.
Nintendo wii The price of a Nintendo wii is already a lot cheaper then a Xbox 360 and a Playstation 3, this is competition based pricing (where they use their competitors price to judge theirs) and the wii already has “wii plus” which is really sensitive to movement. What could Nintendo do to improve their console to make it more competitive now that Sony and Microsoft have brought out new motion technology to compete with the wii?
Pricing Prices of products can make a huge difference in sales in a good or bad way, for example companies might make no money and/or lose money (a breakeven), e.g., Nintendo might get more customers buying their wii than Microsoft and Sony might get with the Xb0x 360 and Playstation 3 because the wii costs £179.99 where as the Playstation 3 costs £399.99 and the Xbox 360 costs £299.99
Loss leader A loss leader is a good or service advertised and sold below its cost price. Its purpose is to bring in (lead) customers in the retail store (usually a supermarket) on the assumption that, once inside the store, the customers will be stimulated to buy full priced items as well.
Loss leader examples When Playstation 3 debuted in 2006 the consoles cost about $800 per console to make and were being sold for up to $400 less than that. Companies don’t usually do this because then they have to make up the loss by selling other things like controllers and other accessories.
Demand and supply In the gaming market, shifts in demand are based on trend, e.g. if a celebrity playing on a particular console is publicised people may want to buy it more. Shifts in supply happen when companies give companies quotas, limiting the amount of consoles imported into the country.
Price Sensitivity If a product is price sensitive, the demand for a product will respond heavily to changes in price. In a price sensitive market, a business cannot increase the price because this leads to a fall in demand and revenue. What factors affect how sensitive demand is to changing prices?
Price Sensitivity Is the product a want or a need? Alternatives/Substitutes Laws that change the market Are these products price sensitive or insensitive? Water Car Beans Oil