A Question That is Asked By Managers: “What Price Should We Charge For This?”
Mar 13th, 2012 by Tsz Wai Jenny Ng
On Matthew’s blog (“Value pricing vs Cost Based”), he has pointed out that one of the most stand-out examples for value pricing would be Walmart. I do agree with Matthew on his supporting points; but one thing that I would like to add is that having a low price does not necessarily mean having good value.
Many companies these days are practicing value-added pricing strategy by having value-added features to differentiate their products or services and support their higher prices. Cathay Pacific is known to be one of the more expensive airlines to choose from when consumers want to fly back toAsia. Despite the fact that it is more expensive, many consumers still choose to take their planes due to its high quality services and the safety assurance. Consumers perceive Cathay’s flight delivers higher value than the cost. Cathay provides many direct flight, high quality customer service on board, more comfortable seats and more. These features areCathay’s competitive advantages which allow the organization to charges a higher price than others.
Another pricing strategy that was not mention in Matthew’s blog is competition-based pricing. I think most companies do use this strategy when they are setting the price of the products and services. Consumers usually compare similar products with its competitors. Therefore it is crucial for the companies to determine its price relatively to the competitors. For example, if the No Name branded apple juice charges the same price as Sunrype’s. Customers would obviously choose the Sunrype due to the fact that No Name brand is perceived as a lower quality, and lower nutrition value brand. Companies need to pay attention to the strategies and prices that the competitors are using, and try to position themselves in a differentiated market to prevent lost of market shares.
Both pricing strategies play important roles in management decision making. Companies need to understand itself as well as customers needs and wants in order to pick the best price for its products and services.