1. Seven (7) Pricing Strategy
Introduction
Pricing is a part of marketing. Proper pricing is vital in marketing strategy. Pricing is one of the
most complex and sensitive areas for the marketing executive. It is very difficult to set price,
particularly when the product is launched in the market for the first time. The complexities of
pricing can be seen in the way consumers perceive the price of the product. Consumers may
view a price as high or low, denoting superior or inferior quality, or reflecting prestige or low
status. As a result, a variety of factors go into developing a finite price. The price set today by a
company is not, however, static. It may have to change the price with the elapse of time to meet
varying circumstances and opportunities. No price, how carefully established-will be appropriate
throughout the product’s life. Competitors may engage in price war with the company. Company
should, therefore, respond to the price changes of the competitors and this move should be a
well-thought one.
The Meaning and Role of Price
The price is what the consumer must give up in order to get the product. It is a representation of
value placed on the product for purposes of exchange. Partially, this value is established by the
marketing executive. Marketers incur certain costs in making, handling, storing, and selling the
product. These costs are usually covered in the selling price except certain expectations.
Marketers seek some extra compensation over the actual costs so some profits are made by them.
Costs and profit expectations, then, become the value the marketing executive places on the
product. The value of the product is not always set by the marketer. Buyers as well help
determine value through their purchasing patterns. Buyers allocate their funds to the goods and
services that maximize their short and/or long-run benefits. Buyers thus, place a trade-off value
on the company’s product by weighing the benefits of having the item against the cost of
foregoing the purchase of other products or retaining their money. The price of the product, then,
will be balanced between the seller’s value and the buyer’s trade-off value. Where these two are
similar, the price will be appropriate. If they do not match, some change in values must occur or
the product will fail in the marketplace.
2. Stages for Establishing Prices
We have already examined the nature and importance of price. It is now time to move on to the
stages followed in price setting. Setting price for the first time is a real challenge to a firm and it
faces this situation when it plans to launch a new product, or introduce an existing one into a new
distribution channel, or area, or participates in a bid. In setting its pricing policy, a firm has to
consider quite a number of factors and proceed following a logical process consisting of seven
steps.
Figure - 1.1 : Stages Involved in Price Setting
Purpose of Pricing Strategy
So what is the purpose of pricing strategy, and why is it important to make sure we charge the
right Price? Let us imagine that we are opening up a new cafe in town. It’s a French cafe serving
beautiful, decorative, and delicious cakes and specialties. We named the cafe the French cafe,
leaving no one unsure of the type of cafe this is, we have appointed an educated and experienced
confectioner, and he wants to impress our guests with his high-quality cakes and desserts. But he
is a confectioner, not a marketing person, and he’s unsure of how to price his cakes and desserts.
So let’s help him out. There are many reasons why charging the right price matters to the success
of our French cafe. Firstly, we need to ensure that the Price makes sense to our chosen target
group, that they perceive the Price to correspond with the way we have positioned the cafe in
their minds. If we look in the window, we can see that this cafe serves high-quality, delicious
French cakes and that it has a décor that fits. Therefore, it would send the wrong signal if we
were to charge very low prices. Like offering an all-you-can-eat buffet for one euro, so charging
a price that doesn’t correspond with the way we have positioned the cafe. It would leave our
customers confused.
3. Seven (7) Pricing Strategy
We have now established an understanding the pricing strategy. Lastly, we have presented an
overview of the different tools and stages for establishing price and purpose of pricing when
determining a suitable price for a company’s product or service. We know that there are seven
types of pricing strategies. Those strategies describe give below.
1.price to your competition;
2.Price to pay the bills (break even strategy);
3..Price to time;
4.price to cost;
5.Price for Package;
6.Price to positioning;
7.Price to value.
Types of Pricing Strategy Applied by the Company
Nestle is the world’s largest food company involved in nearly every field of nutrition, with a
turnover of 88 billion Swiss Francs. It is largest not only in terms of its sales but also in terms of
its product range and its geographical presence. Its field of nutrition includes infant formula,
milk products, chocolate and confectionery, instant coffee, ice-cream, culinary products, frozen
ready-made meals, mineral water etc. Nestle is also major producer of pet food. In most of these
product groups and in most markets, Nestle is the leader or at least a strong number two. Nestle
is focused company with more than 94 percent of the sales coming from the food and beverage
sector. Nestle is present around the globe, on all continents, with around 230,000 people working
in more than 84 countries with 468 factories and with sales representatives in at least another 70
countries. Most popular brands of Nestle are Nescafe, NIDO, Maggi, Polo, Smarties, Milo,
Perrier, Friskies, Kit Kat, and Crunch. Some of their products have broken records: 3,000 cups of
Nescafe are consumed every second, and Kit Kat merited an entry in the Guinness Book of
World Records as the world’s best selling chocolate bar, with 418 Kit Kat fingers eaten every
second around the world. Nestlé Bangladesh Limited is a wholly owned subsidiary of Nestlé
S.A. Switzerland. In Bangladesh, Nestlé imports pure coffee, confectionery; repacks infant
nutrition, full cream milk powder and manufactures culinary products. The popular brands in
Bangladesh are Nescafé, Kit Kat, Polo, Cerelac, Lactogen, Maggi and NIDO in these categories.
The factory of Nestlé is located in Sripur, about 55 kilometers from capital city Dhaka. Nestlé
Bangladesh Ltd. has a vision of becoming the number one Food and Beverage Company in the
country.
Nescafe uses multiple strategies, among which price to value pricing has been their go-to choice
for profit maximization. I appreciate Nescafe’s existing pricing strategy. I think that before
determining a suitable strategy for the organization, they analyze their consumer’s behavior
thoroughly and then formulate the prices according to their target audience. This helps to keep
the consumers connected to the brand. They also believe in profit maximization where they
determine the price according to their production level to generate the maximum amount of
profit.
4. Conclusion
An organization can adopt a number of pricing strategies; the pricing strategy will usually be
based on corporate objectives. After selecting a pricing objective you will need to determine a
pricing strategy. This will assist you when it comes time to actually price your products. As with
the pricing objectives, numerous pricing strategies are available from which to choose. Certain
strategies work well with certain objectives, so make sure you have taken your time selecting an
objective. Careful selection of a pricing objective should lead you to the appropriate strategies. If
the pricing strategy you choose seems to contradict your chosen pricing objective, then you
should revisit the questions posed in the introduction and your marketing plan.
Additionally, different pricing strategies can be used at different times to fit with changes in
marketing strategies, market conditions, and product life cycles. For example, if you’re working
under a status quo pricing objective with competitive pricing as your strategy due to poor market
conditions, and a year later you feel that the market has improved, you may wish to change to a
profit margin maximization objective using a premium pricing strategy.
In the conclusion of pricing strategies, setting the price for the company’s products and services
are a vital roles and important parts for our business success, through the understanding the
distinct between cost and price which company charge the appropriate and best price which
means customer is willing to pay a price to your products then can maximize sales volume and
profit margin.
