Apple’s Pricing Strategies

Vigneshwar Sankaraan       #216268276

all-iphones

Perception of product and brand image

Apple Inc. is a technology and innovative company, which designs, produces and sells Imac, Iphones, Ipods, music. Apple is differentiated by other company by its brand-perception and identification. Apple has become a cult-brand in the last couple of years. Apple has numerous features that are unique and well known in the marketplace today. By placing products such as Iphone, Macbook Apple has attracted a lot of consumers in one way or another. High technology, design, simplicity and the sense of luxury are some of the main features integrated in these products. The company’s products are always ahead of with their competitors in terms of features and uniqueness. In spite of high competition, Apple has always succeeded in creating demand for its products, giving the company control over costs through product differentiation, innovative promotion and advertisement, ensured brand loyalty, and creating hype around the launch date of new products. By focusing on customers willing to pay more and keeping up a premium price at the cost of unit volume.

Apple iphone 6s advertisement showing different features and innovation which creates hype amongst the customer.

Skimming pricing strategy

Many innovative company including Apple use skimming price strategy. This strategy is used when a product is just launched in the market and it is sold at a relatively high cost because of its unique features, benefits to consumers or new product design. However, slowly the prices are dropped as the product lifecycle comes to an end and the product is brought at competitive price. This strategy is generally used for technological products which is new to the market, has consumers willing to pay a premium price, it is far ahead of the competition.

How Apple uses skimming strategy for its Iphone.

When Iphone 5 was launched in the market 4 years ago, it had a premium price. Only few could actually afford an iphone. Gradually, few years later, prices of Iphone have been slashed down with time, such that, everyone could now afford an Iphone 5. A few months ago, Iphone 6s was introduced in the market. Before that Iphone 6 was launched. Both these Iphone were sold at very heavy price and in large quantities. Now people are waiting to buy the much awaited Iphone 7. Presumably, the current generation of Iphone will have a price cut prior to the release of new Iphone. This strategy apple uses here is called skimming pricing strategy.

In other words, here are the lists of benefits of skimming pricing strategy:-

  • Advantage from high short term profits due to the uniqueness of the product
  • To create an effective segmentation and gain maximum profit from each segment.
  • Good return of investment from initial set up costs, which include product research, development and marketing.

Product Lifecycle Planning

As we can see from the Apple’s skimming strategy example, the strategy that Apple is utilizing consist keeping the highest initial launch price that customer will pay and as soon as the demand of the first set of customers is satisfied, the company will lower slash down the prices over time. But if we think in the matter of customer’s perspective, then you wouldn’t buy an Iphone 5 now because it will be technologically inferior to current generation of Iphone. This is one of the downside of the skimming strategy.

screen_shot_2014-09-09_at_1-46-05_pm-0

Other Pricing strategy

Apple uses a retail strategy called “minimum advertised price” (MAP). Minimum advertised pricing policies (MAP) prohibit dealers, resellers from advertising a company’s products below a certain minimum price. It is usually enforced through marketing subsidies offered by a producer to its resellers.

Apple maintains the reputation of its high-priced products by only offering retailers such as Wal-Mart a marginal wholesale discount. This small percentage in savings isn’t enough of a profit margin for retailers to offer big discounts on Apple’s products, which means consumers end up paying a cost close to the producer suggested retail price (or MSRP). However, a seller could give up this small profit margin and offer products at a discount to attract even more consumers. Apple prevents this situation by offering incentives to retailers to sell products at the MAPs fixed by the company.

This strategy is effective, as it prevents retailers from competing directly with Apple’s own retail stores and it also ensures that no particular reseller has a competitive  advantage over another. So Apple is able to keep its supply channels clean as well as make more money on its direct sales.

References:-

Iacobucci, D 2014, Marketing Management (MM), 4th Edition, South-Western, Cenage Learning, Mason.

Apple’s premium pricing strategy and product differentiation (2014), Samantha Nielson, retrieved 3 September 2016, <http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/&gt;  

Which is right business for you? (2016), April Maguire, retrieved 3 September 2016, <http://quickbooks.intuit.com/r/pricing-strategy/6-different-pricing-strategies-which-is-right-for-your-business/&gt;

The marketing mix of apple (2016), Available at: <http://www.marketing91.com/marketing-mix-apple-inc/&gt;

Brand perception is important: Apple is doing it right (2012)<https://www.nuvonium.com/blog/view/brand-perception-is-important-apple-is-doing-it-right&gt;

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Milking The Industry – How Price Wars Are Taking Everyone Down Down

Have you wondered how you are able to relish a glass of warm milk on a chilly winter morning so cheaply? Have you wondered how a heavy bottle of milk hits your pocket lightly? I certainly do not think of anything more than how well my weekly groceries will be contained within my budget.

Down Down

(Chung 2011)

But, we all do watch the news and, as responsible consumers, must not shy away from how this happens. It all started when Coles launched the Down-Down campaign in 2011, offering a litre of milk at just a dollar. It was initially a short-term gimmick to lure customers and gradually increase market share (Patterson 2011). This has triggered a series of discounting schemes initiated by competitors like Woolies and Aldi not just on milk, but other staples too.

Williamson (2013) reports that such aggressive schemes have squeezed profits of suppliers, more so of dairy farmers who receive only 35 cents a litre, a mere 4 cent increase over the last twenty years.

So what is causing this plight? It is the supermarkets’ flawed pricing strategies.

4ps

(Creare Marketing 2012)

Iacobucci (2013 p.107) refers to pricing as an activity of setting a price to a commodity that should be both lucrative and representative of value perceived by target consumers. It is an important component of the 4Ps marketing framework.

Business Queensland (2016) write that businesses may choose from a range of pricing strategies that suit their objectives and that results from market sentiment and demand for their product. They may be:

  • Skimming pricing,
  • Penetration pricing,
  • Value-based pricing,
  • Price discrimination, etc.

Penetration to Predation in no time

Marburger (2012 p.89) defines penetration pricing as a strategy where businesses set a very low price, perhaps even lower than their marginal cost of production. This is done in order to maximise market share and attract a broad customer base and loyalty.

This is exactly what Coles adopted and what followed. Initially, the launch of the Down Down campaign in 2011 signified the adoption of this strategy for all its groceries (not just milk), and it worked right away. In the third quarter following the adoption, Coles reported a five-percent growth in their sales, crossing seven billion dollars, much higher than their rival, Woolies.

Marburger (2012 p.91) adds that, although penetration pricing is a safe bet, a risk of losing price-sensitive buyers in the future persists when prices are brought back up. No wonder Coles announced in a few months that they would continue offering milk at a dollar a litre.

cheap-cheap

(Montgomery 2015)

And Woolies’ response? A direct and cringeworthy, ‘Cheap Cheap’ campaign offering ‘Australia’s cheapest bread’ at 85 cents, among other goods (Ward 2014). This triggered the beginning of predatory tendencies in an industry dominated by the Big Two, Coles and Woolworths.

Predation and Its Diabolical Effects

Predatory pricing refers to an aggressive strategy employed by organizations whereby they undercut prices so much so that they forgo profits in the short-run in seeking to drive away competition and establish a monopoly (Giocoli 2014 p.45).

The colossal burden of reduced profit margins by predation is passed on to the suppliers who exercise meagre bargaining power.

For instance, many of their food suppliers have complained to the Australian Competition and Consumer Commission of power abuses by the retailers. While one supplier revealed how failure to deliver the stipulated quantity would result in the buyer heavily penalizing him, the other claimed that the retailers would constantly revise the terms of trade to their advantage.

Williamson (2013) adds that, of all the suppliers, dairy farmers are the worst hit. Submitting to the retailers’ pressure, a farmer notices that the industry is now able to milk 200 cows an hour, as against just four not so long ago. But the return on production has not grown proportionately.

Not just suppliers, such predatory pricing strategy is hurting the giants themselves. Burke (2016) estimates that the giants would have to drop their average margins from the current eight percent to a slim three percent, in order to keep employing their pricing strategy. This, though, has already cost Woolworths a billion dollars in losses and corporate restructuring.

Lastly, despite the price cuts, there are always other retailers who still manage to profitably outdo the big two, as reported in the video below.

Don’t we consumers benefit?

As analysed above, the retailers’ predatory instincts are highly unsustainable for both suppliers and themselves.

Although we enjoy confining our spending within our budget every week, Giocoli (2014 p.98) explains that we, too, will suffer in the long-run, as persistent predatory pricing eventually leads to unsustainable margins across the supply chain and reduced output offered to us consumers.

Whether one likes it or not, penetrative pricing strategy culminates in predatory tendencies, harming the supply chain. If this continues, we will not be able to enjoy our morning cup of warm milk any longer.

Yogesh K. Sewani

(ysewani@deakin.edu.au, 216042511)

References

Burke, L 2016, The war no supermarket wants to have, News Australia, 5 April, retrieved 5 September 2016, <http://www.news.com.au/finance/business/retail/the-war-no-supermarket-wants-to-have/news-story/d82bf59300beb17ab27a6d3315da71d8 >.

Business Queensland 2016, Pricing Strategies, Queensland Government, retrieved 5 September 2016, <https://www.business.qld.gov.au/business/running/marketing/pricing-products-services/pricing-strategies >.

Chung, F 2011, Coles to launch new milk brand to help struggling dairy farmers, News Australia, 17 May, retrieved 4 September, <http://resources0.news.com.au/images/2011/09/05/1226129/359592-coles.jpg >.

Giocoli, N 2014, Predatory Pricing in Antitrust Law and Economics: A Historical Perspective, e-book, retrieved 5 September 2016, <http://deakin.eblib.com.au/patron/FullRecord.aspx?p=1596886&gt;.

Iacobucci, D 2014, Marketing Management MM, 4th Edition, South-Western, Cenage Learning, Mason.

Knox, M 2015, Supermarket Monsters : The Price Of Coles And Woolworths’ Dominance, Black Inc. Books, DEAKIN UNIV LIBRARY’s Catalog., EBSCOhost, retrieved 5 September 2016.

Marburger, D 2012, Innovative Pricing Strategies To Increase Profits, Business Expert Press, DEAKIN UNIV LIBRARY’s Catalog., EBSCOhost, retrieved 4 September 2016.

Montgomery, R 2015, Roger Montgomery, retrieved 5 September 2016, <http://rogermontgomery.com/content/uploads/2015/04/cheap-cheap.png>.

Patterson, P 2011, Milking the Market: What’s Behind the Coles Woolworths Price War, Business Think, 29 March, retrieved 5 September 2016, <https://www.businessthink.unsw.edu.au/Pages/Milking-the-Market-Whats-Behind-the-Coles-Woolworths-Price-War.aspx >.

Ward, M 2014, Woolworths introduces animated birds as it promotes cut price bread, Mumbrella, 19 September, retrieved 5 September 2016, <https://mumbrella.com.au/woolworths-introduces-animated-birds-promotes-discounted-bread-252381 >.

Williamson, B 2013, The real costs of one dollar per litre milk, ABC Adelaide, 22 February, 5 September 2016, < http://www.abc.net.au/local/videos/2013/02/22/3696424.htm >.

 

September.

September.

It comes after August and before October every year this much we know, however September can mean many different things to many different people. To some it marks the end of a bitterly cold Winter and the beginning of Spring, to others an Earth, Wind and Fire classic hit but to me September means one thing and one thing only – the AFL Finals Series is here.

If you asked the AFL what September means to them, I have little doubt they would give you the same response, however internally the more honest response would be “Profit”. With the Finals on our door step and the various approaches and considerations when it comes to pricing in our minds, there is no better time to look at how the AFL craftily manipulates their pricing strategies to ensure maximum profitability.

The AFL recently announced a revision to their finals pricing structure, with the headline change a reduction in the price of an entry-level finals ticket to $35.00. Further reading into the article (link below) shows that “For the first time in three years, the price of other ticketing categories will rise slightly in weeks 1-3”

http://www.afl.com.au/news/2016-08-23/35-entry-price-for-finals-tickets

This notion is no more than a publicity stunt, with the median overall ticket prices rising, and the grossly overpriced Grand Final tickets getting more expensive again in 2016. I pose the question to the AFL, if they knew that the matches earlier in the finals had a chance of selling out, would they have decreased the price? Or like the Grand Final (an event that will inevitably sell out), would the prices be increased? Inevitably these questions are largely irrelevant, because the folks at home who see this news story get that warm fuzzy feeling and the perception of a bargain in mind, and have little regard for the supply and demand complexities mentioned above. Simply put, the AFL is dropping the price of tickets for games that will not sell out, that is, they have a supply level that is not being met, and decreasing prices to find an equilibrium that will allow them to sell more tickets to fill the seats that would otherwise be empty.

Hawks2015

Having cast a light on the practices of the AFL we can further analyze the marketing elements in place. Looking internally, the potential explanation behind the AFL’s change of strategy can be traced back to the quest to remove pricing as a barrier to entry for fans, to encourage more people to get the matches, creating a better atmosphere and experience for all. With this considered the cynic in me suggests their motivations are purely financial but you can be the judge of that. Externally, we know the cost of living is constantly on the rise and the expenses involved in families going to the football are continually rising in parallel, this initiative may be the difference to families and those with a lower disposable income allowing them to attend the game they love.

There are many other options the AFL could’ve explored, having already hinted at the prospect of engaging a US-Style dynamic pricing strategy in the near future. In practice, such a dramatic shift would likely polarize the fan base and inevitably do more harm than good. The other option could be to introduce an early-bird special much like the NRL, offering cheaper tickets to those who book ahead of time, however given the uncertainty of outcome and the lack of a secondary ticketing marketing this could prove equally risky. Given the year-on-year profits reported by the AFL, a unique opportunity to actually drop ticket prices across the board could have been explored, generating widespread positive publicity, and hopefully allowing their brand to be painted in a positive way.

With all considered the AFL would be remiss not to adjust their pricing periodically as changes in the economic climate as well as inflation generally play their part. The irony of the whole situation is that the AFL as a non-for-profit organisation has the luxury of being able to adjust its pricing strategies almost risk-free, without the careful considerations of a retailer in a competitive marketplace who might have to consider the various complexities such as supply costs, market demand, competitor pricing and company policies. Whilst the AFL no doubt should and likely does make these considerations, they have much greater scope for experimentation as evidenced by their unique hybrid Finals Pricing Structure.

In conclusion, the unique way in which the AFL has priced their finals ticketing provides an interesting insight into the considerations and approaches taken to pricing. Whilst the AFL has attempted to position themselves as doing a great service to the football public, a more profit motivated mentality is perhaps a more accurate description of their true objective. Regardless, there’s one thing I know for sure, If my team found their way into a Grand Final for the first time in 55 years, it wouldn’t matter what it cost, I’d be there.

 

 

Harrison Shannon-Brown

Price Taker to Price Maker: Journey of pricing the Nike way.

Price is one of the essential inherent of the 4P’s in marketing (Kotler, 1997). Developing an appropriate price is one of the most difficult challenges a business faces as consumers are more likely to react to this variable. There are numerous pricing strategies available at a firm’s disposal. Strategies like Price bundling, Market skimming pricing, Penetration pricing, Value pricing, Cost Plus pricing, etc. to name a few (Lamb, Hair and McDaniel, 2008) . However, businesses should take into account their cost, target market and competitors before deciding on the pricing strategy they would like to adopt. Moreover, demand elasticity plays a pivotal role in ultimately deciding the final price of the product. The pricing strategy employed by the firm and the actual price of the product eventually impact the consumer’s decision on whether or not to purchase the product.

maxresdefault nike price

(Google.com.au, 2016)

According to Nike’s mission statement, its aim is to constantly innovate and inspire every athlete around the globe (Anon, 2015). Nike, one of the most successful firms in the sportswear market, decided to move away from the conventional pricing strategy. Nike since then, adopted an altogether a new path to their pricing model, the consumer value model depends on the dissolution of how much a buyer would be willing to pay for each product. According to Nike’s CFO Don Blair, the firm’s strength lies in its products and innovation and hence commands a higher price compared to its competitors. Moreover, Nike is able to expedite growth in the U.S. footwear market single-handedly, helping the firm carve a niche in “value added” competitive advantage against its rivals.

price differentials

(Google.com.au, 2016)

In the advent of 2013, a pair of trainers in the United States cost $66.85. Nike, though it operates in both the lower and the premium models, it’s seen unprecedented growth in premium footwear models. In the above picture we can clearly see the price differentials between Nike and Adidas.

Previously, Nike followed the pack and adopted the originally used “cost-plus” model. In this model firms generally added a mark-up value to the original cost of the product. This kind of pricing strategy worked well as the firm’s were guaranteed a certain percentage of profit if consumers paid for the product. Consumers now are more than willing to pay for sneakers due to the global brand image that Nike has developed. This is why Nike finds the consumer value equation so effective. Over the past few years, Nike’s selling price has increased in global markets. Nike with its varied product categories is trying to expand the horizons of brand premiums even further.

Nike-v-Adidas-head-to-head (Google.com.au, 2016) company progresssales figures 1

(yahoofinance.com, 2016)

In the above graph we can see the positive impacts the new pricing strategy has bestowed on the firm. We can see how the value of the firm has increased in heaps and bounds over the years.

line graph

(yahoofinance.com, 2016)

In the above Graph we see the upward trend in average selling price and unit sales in footwear and apparel worldwide over a period of 2 years.

Furthermore, The Forbes Fab 40: The World’s Most Valuable Sports Brands 2014 ranks Nike as the no. 1 sports brand across the globe. Nike with its immaculate brand image, innovative products, and high-profile endorsements from world-class athletes, has strategically located its products at the premium price levels in the market.

In 2014, Nike’s selling prices on footwear increased on average by 5% worldwide and 4% in North America. On the other hand selling prices for apparel increased by 4%. Whereas, in the first quarter of 2015, average selling prices in footwear increased by 7% worldwide and average selling prices for apparel increased by 3%. Prices of footwear further increased by 9% in North America. Whereas, Apparel prices further rose by 3%. Contrary to the increase in prices, worldwide unit sales increased, growing by 11% and 8%, respectively.

Moving ahead in its venture, Nike is expected to continue with its premium pricing strategies. For example, constant product developments will accredit Nike to charge higher premiums. In 2013 alone Nike filed around 540 patents. It is more or less likely to add a range of premium products to its apparel basket. These will probably result in both top-line and margin improvements.

Nike faces the risk of stagnation in key markets across the globe. Slowdown in markets across the globe especially in Europe, Japan, and Brazil may impact Nike’s ability to continue with price-hiking strategies.

Only time will tell if Nike can lead the pack of brands or will a new brand emerge and dethrone Nike.

Zico Gonsalves.

 

References:

Anon, (2015). Nike Annual Report. [online] Available at: http://s1.q4cdn.com/806093406/files/doc_financials/2015/ar/docs/nike-2015-proxy.pdf

Just-style.com. (2014). ANALYSIS: New pricing strategy pays off for Nike. [online] Available at: http://www.just-style.com/analysis/new-pricing-strategy-pays-off-for-nike_id122400.aspx

Kotler, P. (1997). Marketing management. Upper Saddle River, NJ: Prentice Hall.

Lamb, C., Hair, J. and McDaniel, C. (2008). Marketing. Mason, OH: Thomson/South-Western.

Lancaster, G. and Reynolds, P. (2005). Management of marketing. Oxford: Elsevier/Butterworth-Heinemann.

Marketing91.com. (2016). Marketing Mix of Nike. [online] Available at: http://www.marketing91.com/marketing-mix-nike/

Panmore Institute. (2016). Nike Inc. Marketing Mix (4Ps/Product, Place, Promotion, Price) Analysis – Panmore Institute. [online] Available at: http://panmore.com/nike-inc-marketing-mix-4ps-product-place-promotion-price-analysis

Google.com.au. (2016). nike prices compared with other competitors – Google Search. [online] Available at: https://www.google.com.au/search?q=nike+prices+compared+with+other+competitors&biw=1920&bih=911&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj1qJLZqfbOAhWEp5QKHbXEAvsQ_AUIBigB#tbm=isch&tbs=rimg%3ACRzNqT7Rs6WrIjgkQkMQAx1VzgZUWlCoYn9bG4u0VPZ-okP5F5Qp7shU1TG5DjyTvIpLgne7QsPbu3ZZqEQ7kyEQ8SoSCSRCQxADHVXOEaKbSxR7RuFJKhIJBlRaUKhif1sRyRy8JQFCFUEqEgkbi7RU9n6iQxFxtEOcDZYBJCoSCfkXlCnuyFTVEZr0xiIhBi8TKhIJMbkOPJO8iksRgaeRjlrz2FEqEgmCd7tCw9u7dhFGMh0sYPA4SCoSCVmoRDuTIRDxEfFqJ3g3aW1T&q=nike%20prices%20compared%20with%20other%20competitors&imgrc=HM2pPtGzpavA6M%3A

Marketing Discussions. (2015). NIKE Pricing Strategy: Cost-Plus vs. Consumer Value Equation. [online] Available at: https://marketingdiscussions.wordpress.com/2015/03/18/nike-pricing-strategy-cost-plus-vs-consumer-value-equation/

Slideshare.net. (2016). Nike’s pricing strategies. [online] Available at: http://www.slideshare.net/SiriornVichaiwatanap/microtheme2final

Pride, W. (2007). Marketing. Milton, Qld.: John Wiley.

Tadajewski, M. and Brownlie, D. (2008). Critical marketing. Chichester, UK: Wiley.

Marketrealist.com. (2016). Understanding NIKE’s Pricing Power And Premium Products Tilt. [online] Available at: http://marketrealist.com/2014/12/understanding-nikes-pricing-power-and-premium-products-tilt/

yahoofinance.com. (2016). Understanding NIKE’s Pricing Power And Premium Products Tilt. [online] Available at: http://finance.yahoo.com/news/understanding-nike-pricing-power-premium-213606075.html

 

DAN MURPHY’S – LOWEST PRICE GUARANTEE

dan-murphys-store-banner

     

 

PRICE AND PRICING:  In general the price is the payment or benefit between two parties in exchange of goods or services. Pricing is a process where the business set up a price or amount for selling or exchanging their goods or services to consumers. The pricing of any company or a business mainly depends on many internal and external  factors like manufacturing cost, quality of product, competitors, market position and the brand image of an product. The pricing is the one of the part of four p’s where the company gets the revenue. The profits of any company depend on pricing this can be approached by three different ways like industrial, market and the transaction level.

There are many steps involved in the price setting like select the price object, resolve demand, estimate the cost, analyze the price mix, select the pricing strategy and finally select the final price.

 

FACTORS TO DETERMINE THE PRICING STRATEGIES:

 

PRICE COMPITETOR:

The price of the product should not have much variations from other competing company’s ,always the price should be average so that many people will be attracted to buy it, and the price should not be too high from the competitors so that the consumers will not show interest on it.

PUBLIC DEAMND OR BRAND:

The price of an product should  always based on the public demand and the brand value, based on these factors the price may increase or decrease.it also depends on the company revenue.

also depends on strategy’s  like high end , middle and cost based.

 

PRICING STRATEGIES OF  THE DAN MURPHY’S:

Dan murphy’s is one of the Australian liquor market established in 1952 and owned by the Woolworths with an around 200 stores in the Australia. This is the biggest and best liquor super market of Australia which sells the liquor at too low price than any other market in Australia.

The Woolworths also has other small stores like BWS and other and this competes mainly with liquor land , first choice and IGA liquor.

When compared to all the competitors like BWS, IGA, liquor land and first choice the Dan murphy’s provide liquor with low price at all the times.

They have a team which works on the prices of liquor every day to make the prices available low when compared to any other market in the Australia.

The main motto of the Dan murphy’s is “we do not match the prices with others we beat them’’.

They are succeeding in this since many years this is mainly due to their pricing strategies. The main strategy is daily evening the team pricing team of an Dan murphy’s starts comparing its prices with all its competitors and make sure to make the prices low , If they find and product with matching price they make their product low compared to that matching one.

Dan murphy’s declares that they are lowest price liquor sellers in the Australia and and announces that if any found the products with price less than Dan murphy’s they are allowed to accept it and give them less than that price.

Because of their successful maintenance of lowest prices all the time the Dan murphy’s has gained a lot of customers when compared to their competitors.

Maintaining the promotions all the time with lowest prices made Dan murphy’s stand top.

With the maintenance of huge stock, lowest prices, with biggest online market and well know ledged employees made the Dan murphy’s win the Roy Morgan customer satisfaction award.at present Dan murphy’s has biggest and best online market with around two million customers in the online market , which made the profits increased for the company.

The Roy Morgan research also announced that the 26 percent of the liquor buyers of Australia are buying in the Dan murphy’s which is high differentiated with their competitors likes BWS which has around 18 percent of share.

531

 

CONCLUSION:

By making the products available at low rates consistently since the years made the Dan murphy’s stand at best position in the market and it also proved their slogan lowest liquor rate guarantee.

101221_101308633_dan-murpheys-low-price-article1-210x300

 

 

 

REFERENCES:

lacobucci, D. (2013). MM4. Mason, Oh. South-Western College Publishing.

Roy Morgan. (2016). Dan Murphy’s (and Woolworths) blitzing the Aussie liquor market. [Online] Available at: http://www.roymorgan.com/findings/6552-dan-murphys-woolworths-blitzing-aussie-liquor-market-201511152333.

https://www.danmurphys.com.au

https://en.wikipedia.org/wiki/Dan_Murphy%27s

http://www.google.com.

 

chaitanya reddy manda

id:216255318

 

 

 

 

 

 

 

 

 

COLES LATEST WARCRY

 

 coles

Price and pricing strategies have gained importance in today’s world due to a slow economy and competitive market and hence to obtain an advantage careful approaches are needed in order to attract the customers but at the same time make profit (Bretcu 2014). The main governing aspect of a retail company is price of a product as it is the most flexible element and which generate revenue (Rahinel & Ahluwalia 2015).

A consumer’s purchasing choice depends on price perceptions rather than the actual price and retailers adopt pricing strategies hoping to influence these perceptions hoping they impact the choice (Danziger, Hadar & Morwitz 2014). The three main pricing strategy mechanism opted by the retailers are (Hoch, Dreze & Purk 1994) ,

  • frequency discounting, where retailers offer frequent but small discounts
  • depth discounting, where retailers offer infrequent large discounts
  • Everyday low pricing (EDLP), where retailers offer products at a constant low regular price.

Consumers tend to choose retailers most prone to offering products at lower prices than those which are cheaper on average. Coles recently announced that it will reduce the price of nearly 145 private label grocery lines by about 25 per cent as the supermarket war heats up on home brand. Coles is an Australian supermarket-chain owned by Westfarmers and along with Woolworth’s accounts for 80% of the Australian market. (Zappone 2009).

Coles is synonymous with everyday pricing scheme which locks in for at least six months, which according to Coles managing director John Durkan is the promise they try keep with customers. This strategy results in more predictable consumer demands thereby reducing excess inventory levels etc. (Neff 2011). Another pricing strategy adopted by Coles is selling different products at half price per week. But an obvious disadvantage of this method for Coles is that most customers including me will just wait until the offer comes along. Coles everyday pricing scheme has its skeptics who say that the model has not been able to drive sales as expected (Sue 2015).

coles everyday

Coles strategy of lowering their home band prices is aimed at calling out private label and a pre-emptive strike on Woolworths while it is still in a transition phase over private label and telling them that they need a bigger arsenal in order to compete with Coles (Catie 2016). This foray is likely due to the fact that most Australians preference for buying private label groceries over big brand products has grown from 44% to 65% so the big supermarket chains like Coles instead of paying a premium for big brands can source these goods more cheaply and offer them to their customers at a cheaper price. (Murphy 2016). This approach is also likely to cause Aldi to look over their shoulders as well. Coles supermarket boss, John Durkan says Coles brand products is a sure way of offering their customers low price products t every aisle.

Coles pricing strategy is governed by their control over the market which allows them to price their products at a reasonable price to attract the customers and at the same time they offer lower prices to the suppliers thus allowing them to balance their books (Keith 2012).

The pricing strategy employed by Coles and its biggest competitor mainly Woolworths are similar thus resulting in a price war among them. The measures adopted by Coles will not be allowed by Woolworths and as such sooner or later there will arise a price war as they tend to underprice products compared to their competitors (Thayer 2009). The main cause of price wars are

  • Product differentiation – as most products will be similar price will be distinguishing feature
  • Penetration pricing – offer lower prices to capture new targets
  • Oligopoly – when there few competitors each one closely monitors the price of others and act accordingly.
  • Process optimization – lower prices rather than disposing them
  • Bankruptcy
  • Predatory pricing – retailer with a healthy bank balance lower prices to drive their less accomplished competitors out.

Coles being a public listed company faces certain restrictions on their ability to reduce prices as they are concerned with current financial year which is not applicable in the case of Aldi a private based company which has more freedom financially to plan into the future (Gorecki 2016).

So a price war while advantageous to customers like us will allow other players like Aldi to catch and pass them.

 

Sudeep Vasudevan

ID – 215387485

username – svasude

Reference

Bretcu, A 2014, ‘MARKETING CONTROLLING AND PRICE POLICY FOR SMEs’, Analele Universitatii ‘Eftimie Murgu’ Resita. Fascicola II. Studii Economice, pp. 34-41.

Catie, L 2016, Coles slashes private-label prices, Age, The (Melbourne), 03126307, <http://ezproxy.deakin.edu.au/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=n5h&AN=SYD-6QK3DWRBJ541AG85VN8F&site=eds-live&scope=site>.

Danziger, S, Hadar, L & Morwitz, VG 2014, ‘Retailer Pricing Strategy and Consumer Choice under Price Uncertainty’, Journal of Consumer Research, vol. 41, no. 3, pp. 761-74.

Gorecki, A 2016, ‘Another nail in the coffin for independent supermarkets ’.

Hoch, SJ, Dreze, X & Purk, ME 1994, ‘EDLP, Hi-Lo, and margin arithmetic’, no. 4, p. 16.

Keith, Sarah 2012, ‘Coles, Woolworths and Locale’.

Murphy, J 2016, ‘Best home brand products winning supermarket war’.

Neff, J 2011, ‘Why promotion may end up a bad deal for packaged goods; Everyday low prices are moving merchandise better than coupons, short-term pricing pacts’, no. 5.

Rahinel, R & Ahluwalia, R 2015, ‘Attention Modes and Price Importance: How Experiencing and Mind-Wandering Influence the Prioritization of Changeable Stimuli’, Journal of Consumer Research, vol. 42, no. 2, pp. 214-34.

Sue, M 2015, Coles’ everyday discount ploy faces scrutiny, Sydney Morning Herald, The, 03126315, <http://ezproxy.deakin.edu.au/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=n5h&AN=SYD-6K8HFDVVGZ4WR8ENLQR&site=eds-live&scope=site>.

Thayer, W 2009, ‘Pricing for profit: how to deal with price wars, private label price gaps and promos that plop instead of pop’, no. 2, p. 14.

Zappone, Chris 2009, ‘Supermarket duopoly blamed for soaring food prices’

 

Necessary medications cost MORE…!!!

As the drug prices have been rising it directly indicates the theory of “tacit collision”, Knittel &Stango (2003). With consideration to there being not much change over years. Competitors raised prices of the old products rather than trying to compete with the new players trying to gain market share.

To legitimize these high costs, producers similarly refer to research ventures, the expense of procuring and handling the dynamic fixing, promoting costs, and feeble interest (Haffner, Torrent-Farnell and Maher, 2008) The expense of creating Cerezyme(drug), be that as it may, which offers the same properties as Ceradaze utilizing a recombinant that is a great deal less costly to deliver, is esteemed at $30 million . As per McCabe et al. (2007), generation and advertising expenses are unimportant for this medication. Ceredase (alglucerase) was found and created by researchers at the National Institutes of Health in the 1970s and was endorsed by the Food And Drug Administration(FDA) taking after clinical trials led and supported by the last.

As a rule, R&D costs for vagrant medications are 25% of the expenses of standard medications. What’s more, makers can rapidly recuperate their speculation by getting a restrictive endorsement for the vagrant particle. The expenses connected with clinical trials are likewise low because of the little number of patients included. On the premise of data gathered from the ClinicalTrials.gov database, Hall and Ludington (2013) set up at 124 the normal number of patients enrolled for stage III clinical trials of vagrant medications. Besides, Thornton expresses that some stage III trials are directed with tests as little as 15 patients, while others are the aftereffect of joining a trial from a past (Hall and Ludington, 2013).

Health Canada characterizes vagrant medications as those pharmaceuticals that are utilized to treat uncommon illnesses. An uncommon illness is characterized as life undermining, genuinely weakening, or a genuine perpetual condition that lologo-4-664291651ad2a8c9f1f3bd2012d721fb90287a79.jpegne influences a little number of patients. Regularly, that implies less than five in ten thousand individuals. Different global well being associations and the Canadian Organization for Rare Disorders assess the quantity of uncommon ailments at more than seven thousand. By far most (around eighty for each penny) of these are hereditary sicknesses. They have names as sach Tay, Fabry’s and Wilson’s sickness.

Costs connected with the offer of vagrant medications are additionally immaterial. Patients with uncommon infections are, generally, alluded to and took after by groups of experts, specialists, and drug specialists in tertiary doctor’s facilities. Authorities are presented to the promoting of vagrant medications all the time through their clinical exercises, showing exercises, and research exercises, and through their cooperation in worldwide gatherings.

 

At long last, it is advantageous to take note of the commitment of patient associations in the subsidizing, examination, and improvement of vagrant particles. For instance, the American Cystic Fibrosis Foundation has put more than $300 million in the advancement of about all medicines endorsed in the United States for this uncommon ailment. The establishment is effectively required in the sponsoring of 37 new atoms presently being worked on (Hall and Ludington, 2013).

As of not long ago, the sole reason for vagrant medication performing was to support R&D of new medicines for vagrant or uncommon ailments. The Orphan Drug Act in the U.S. offers charge credits and exceptional patent security to medication producers. Be that as it may, what’s useful for Pharma is not generally useful for patients. Until the end of 2013, the cost of trientine(drug) in Canada was near $12,000 every year (a great deal of cash). Drug creator Valeant(drug) purchased the organization that claimed the North American permit to make trientine. The organization said it couldn’t bear to make the medication accessible at a profound rebate, and supported the cost to almost $160,000 a year. A wrinkle in the images_dgdl_chart1.jpgdirections here implied that there was nothing Canadian powers could do to prevent the expansion. In the end, a less expensive form of the medication was found, and Valeant set up a program to settle the expense of its item – however for to what extent? What’s more, this isn’t the main case.

(Huron Consulting Group, 2016) [Image]

On the premise of these information, we presume that estimating depends on what patients and/or outsider payers will pay. Since vagrant atoms are focused at a hostage advertise and have no helpful counterparts, outsider payer associations have no place for move and regularly leave themselves to tolerating the maker’s recommended value, more so since they are subjected both to the impact of the media and to weight from patient affiliations (Iskrov and Stefanov, 2014).

 

Name: Tiyala Louis(twlouis@deakin.edu.au)

Student ID:215215595

 

References

  • Knittel, C. and Stango, V. (2003). Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards. American Economic Review, 93(5), pp.1703-1729.
  • Haffner, M., Torrent-Farnell, J. and Maher, P. (2008). Does orphan drug legislation really answer the needs of patients?. The Lancet, 371(9629), pp.2041-2044.
  • Hall, A. and Ludington, E. (2013). Considerations for successful clinical development for orphan indications. Expert Opinion on Orphan Drugs, 1(11), pp.847-850.
  • Iskrov, G. and Stefanov, R. (2014). Post-marketing access to orphan drugs: a critical analysis of health technology assessment and reimbursement decision-making considerations. ODRR, p.1.
  • Huron Consulting Group. (2016). Orphan Drug Pricing Strategies. [online] Available at: https://www.huronconsultinggroup.com/Insights/Update/Life_Sciences/Orphan_Drug_Pricing_Strategies [Accessed 4 Sep. 2016].
  • Assessing the economic challenges posed by orphan drugs: A response to McCabe et al. (2007). International Journal of Technology Assessment in Health Care, 23(03), pp.401-404.

 

Chemist warehouse-the lowest prices guaranteed!

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Chemist warehouse, which is  known for its low prices on medicines, perfumes ,vitamins and other stuff.  The slogan and banners outside the pharmacy is “Australia’s cheapest chemist” and “the lowest prices guaranteed”. what makes chemist warehouse so confident on the prices? we should start from the catalogue.

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According to catalogues on Chemist warehouse website, we can find that chemist ware will introduce some products to make a promotion on half prices every once in a while. Most of the half prices products are on vitamins and other health care products, Moreover , the prices on perfumes are lower than it in big malls like David Jones and Myer.

Compared with other competitors, such as  Amcal pharmacy, Terry White, Priceline and other local pharmacies, the prices in Chemist warehouse are still the lowest. There is one slogan is noticeable that  lowest prices guaranteed. If any customers find any items are cheaper in other pharmacies, Chemist warehouse will do the price match and give 10% off the differences.

Price sensitivity and Cost based strategy

The price match guarantee is a major pricing strategy that most stores use to make sure the price is competitive.   As most of the products can be found in other pharmacies, customers are easy to compare rices and find substitutes, as a result, the customers show low brand loyalty.

When the customers are price sensitive and the market is in violent competition,  it is easy for Chemist warehouse to determine a select a price strategy. The Cost based will meet the situation.

Systematic biases

This is a advertisement on Youtube, we can find that the striking  labels  are put out on major products, even the prices are the same with the old one. Why chemist warehouse like to do this?

The strategy used here is “Price discount and mood” , all the products in Chemist warehouse have labels, in which there are three numbers, the current prices, original prices and the money you saved. The discounts on each label will make customers think they are smarter and raise a feeling of directly money save. Even in the recipe of your shopping, there will show how much you have saved in total. However, the current prices are permanent and I never see Chemist warehouse sell products on original prices.

Another strategy is “prices ending in 99”.  This is a major pricing strategy most retail stores will use. we can easily find it around us, Coles, Woolies, JBhifi etc. Prices end with 99 like $9.99, will raise a feeling of more cheap, the price $9.99  is more attractive than $10.

price discrimination

Another pharmacy which related to Chemist warehouse is My chemist. These two pharmacies are belong to a same company. however, almost all the My chemist are located in big malls with large flows.  The prices of same items in My chemist is a little higher than Chemist ware house. This is price discrimination.

price discrimination in not illegal,  the prices of Chemist warehouse and My Chemist is determined by the rent cost. The location of My chemist is better than Chemist warehouse in same region. For instance, in Doncaster shopping center,  My chemist is located in the center near Coles, however, Chemist warehouse is outside the shopping center. In this way, My chemist has higher fixed cost on rental and more convenient for customers.

In conclusion, the price strategies of Chemist warehouse are obviously successful. The major factors are  accurate segment and positioning , also the selection of pricing strategies are important.

 

Kaiyong XIE (ethan)

213058959

 

reference:

‘CHEMIST WAREHOUSE’,2015,Mercury, The( Hobart),6 December, Newspaper Source Plus, EBSCOhost, viewed 3 Sep,2016

Roy Morgan Research Ltd( 2013), The rise(and rise) of Chemist Warehouse <http://www.roymorgan.com/findings/rise-of-chemist-warehouse-201308212347&gt;;

Chemist Warehouse Catalogue. (Fri, 19 Aug – Sun, 4 Sep)<http://catalogues.chemistwarehouse.com.au/catalogue/cool-dads-only/57rluqy3r.html?pid=promotedCatalogue#pageNo=8&gt;

Why Shop With Us? <http://www.chemistwarehouse.com.au/AboutUs/Why-Shop-With-Us&gt;

Time to increase sales!!!

price 1

What is price? / Why need a price? A measure of perceived value for goods or services (Business Dictionary 2016). Prices provide a mechanism for the company to obtain value back from company (Iacobucci 2014, p107).

“Is your price right?” is one of the important marketing issues which could vital for the success of business and it’s all about standing out from the crowd.

After all, if your price isn’t right for your customers, how can they be expected to purchase your products?

Setting the right price could improve customer satisfaction and increase how much you sell. It means that the right price would attract your potential and target customers and increase your revenue.

But where to start???

Below, the short video gives the briefly introduction of setting the right price.

There are many different methods of pricing strategies in business. Although there is no one sure-fire, understanding the psychological pricing strategy can help.

The strategy of psychological pricing is used consumers’ emotional response and poor awareness of price to boost sales and maximize the company’s profit (Iacobucci 2013, pp. 116-117). It can be a useful tool for increasing and attracting consumers to make a purchase, including:

The secret behind setting the right price:

Charm Pricing

At the beginning, you can think about the questions which are shown below:

Do you often see the price end in 99?

Do you have any experience of purchasing products end in 99?

Do you ever think about why the price often end in 99?

price 2

For the past decades, many sellers start to use charm pricing which is means the prices that end in 9 or 99. According to several researchers, customers are more likely to buy those products which end in 9 or 99 (Carver & Padgett 2012) because they believe the price end in 9 or 99 is a ‘special number’ with discount. Also, people usually see prices from left to right. They may only impress the first number of price than the whole price (Kotler and Keller 2012). For example, it’s reliably known that $8.99 is more charming than $9. However, the truth is customers not always purchase the cheapest price than they think when they buy something which end in 9 or 99.

Here is an example from Apple. All of the Apple’s Mac is end in 9 or 99. It means that using charm pricing for sell the product could be a useful and common way to attract customers to purchase due to customers prefer to pay less.

Promotional Pricing

Who does not like free?

‘Buy one, get one free’ or ‘Buy one, get one 50% off’ which one would you prefer?Price 3

Promotional pricing is a method to attract customer’s attention to purchase the product. This pricing strategy includes providing coupons, lowering the price of a product or offering specials, for instance, ‘Buy one, get one free’.

Moreover, language can also be a tool when using promotional pricing strategy for attracting customers to purchase the product.

Although the ‘Buy one, get one free’ is same as ‘Buy one, get one 50% off’. Consumers are more prefer BOGOF, even though the meaning of these two options are identical.

The ‘Buy one, get one free’ pricing strategy is effective all the time. Because consumers would be happy when they think they will get something else in return. It seems like getting more. In other word, people are more likely to purchase something if they can get something “free”. Promotional pricing is a pricing strategy which is based on using customers’ mental accounting (Iacobucci 2013, p. 117).

Comparative Pricing

Do you think placing expensive one next to standard is an effective strategy?

price 4

Comparative pricing is using the simple method which is offering two similar products at the same time but making one product’s price higher than the other to attract consumers. This is a psychological game for customers who need to make a choice between two similar products but have different prices. If consumers visually distinguish the price from a reference price, they trigger a fluency outcome.

This strategy is usually work well with electronic brands, which place side by side bread maker with similar quality but different prices. It the functions of these two bread makers are similar, customers are more likely to choose cheaper one.

Conclusion

Charm pricing, promotional pricing and comparative pricing are three of the common psychological pricing strategies for you to implement into your works.

So get out there, and start to get smart with your pricing strategy!

By Mao Dong Ren

210025799

Reference list:

Carver, J, & Padgett, D 2012, ‘Product Category Pricing and Future Price Attractiveness: 99-Ending Pricing in a Memory-Based Context’, Journal Of Retailing, vol. 88, pp. 497-511, retrieved 31 August 2016, ScienceDirect, EBSCOhost.

Iacobucci, D 2013, Mm4, n.p.: Mason, Ohio : South-Western ; Andover : Cengage Learning [distributor], [2013], retrieved 31 August 2016, DEAKIN UNIV LIBRARY’s Catalog, EBSCOhost.

Kotler, P, & Keller, K 2012, Marketing Management, n.p.: Upper Saddle River, N.J. : Prentice Hall, c2012., retrieved 31 August 2016, DEAKIN UNIV LIBRARY’s Catalog, EBSCOhost.

Business Dictionary 2016, Price, Business Dictionary, retrieved 31 August 2016, <http://www.sciencedirect.com/science/article/pii/S0019850104001129&gt;.

Iacobucci, D 2014, Marketing Management (MM), 4th Edition, South-Western, Cenage Learning, Mason.

SBUX-It’s not just a coffee,it’s an Exquisite experience While consuming Coffee.

SBUX 1

Starbucks as a Brand has an interesting thing about its prices:  Ability to leverage brand value in its premium pricing strategy fascinates everyone, when Brands such as Dunkin Donuts & Mac Donald’s are trying to reduce the price of their coffee.


How High Prices for its Coffee describes Starbucks Brand Value?

Pricing and value are related to each other and reflects the Brand image to the consumer. If a brand knows that its quality is good and targeting & positioning is implemented in the correct manner, Brands must have confidence in their price and should not consider dropping their Prices for Products. It is important to remember that Goods or services cannot be Good and Cheap At the Same Time.

Starbucks is the leader of the espresso market. As an individual organization, it controls a few times more market share of the overall industry than any of its rivals. It’s ability to offer combination of Quality, Authority, and relative value to its consumer enables the company to charge Premium Prices.

The company maintains strict Quality controls in Coffee souring as well as Customer Service. Lot of time is spent on Differentiating From its Competitors by designing coffee shops in unique manner, adopting advance machinery for its coffee and providing fee Wi-Fi and allowing customers to sit Coffee Stores after they have finished their beverage. Whenever Prices are increased , Consumers don’t mind Paying extra .


How Starbucks Value Based Pricing works and Boost Margin?

Few companies are able to Maximize their Profits by using Value based Pricing Method. Starbucks is implementing this technique successfully by utilizing Customer analysis which helps to determine the maximum price consumers are willing to play. After conducting the Market research, they increase prices by 1% margin on certain products to raise profits. It is an established fact from Mckinsey and Co back in 1990’s that when Prices are increased by 1%, it leads to 8.7% increase in operating Profits without losing Volume.

Overview of the Starbucks Premium Pricing Strategy

A) The Right Customers and The Right Market

Starbucks price increases have Discouraged Price Sensitive Consumers to buy its Coffee. Leaving Higher Income Loyal Customers who consider Coffee beverages as an Affordable Luxury. It avoids going into Price war with chains like Dunkin donuts and Mac Donald’s and has established its premium brand image for their Product and Services. Because Loyal High Income Customers who are addicted to the Starbucks Coffee are not affected by the increase in Prices, The company is able to Maintain its Inelastic Demand Curve and small increments in Price has a huge effect on their Margins and also covers for the Customers who Switched to Cheap Coffee Chains.

 

sBUX5

It Represents much more Upright Curves since Little Quantity Changes occur with movement in Price unlike Elastic Demand

Furthermore, Specific Regions are selected for the Price Hike and Price vary across a Region. Price Hike is done in those Cities where People are not price sensitive to the changes and see it as a necessary luxury for Survival.

B) Product Versioning

They apply cost increments to particular beverages and sizes as opposed to the entire lot. By raising the cost of the tall size prepared espresso solely, Starbucks can capture buyer surplus from the clients who find more value in moving up to Grande or Venti. Through Product Versioning, Firms can enjoy Higher Margins from these clients who were influenced by the Price Hike.

C) Price Communication

Starbucks expertly conveys their cost increments to manipulate Consumer Perception. The Price hike may be founded on an examination of the client’s ability to pay, however they relate the expansion with what gives off an impression of being a reasonable reason such as increasing Labour Cost, Commodity Cost and increased wages to make the Price Hike insignificant.


 Price approach by Starbucks’s Rivals

Pricing Strategy adopted by Dunkin Donuts and Mac Donald’s  is based on Cost plus Pricing  Approach.It consist of setting the price based on production Cost and wanted level of Mark up. Starbucks Rival Firms aims to capture the most of Market share by offering coffee Beverage at low price and still able to achieve Profitability and ROI And also focus on Maximize volume of sales in order to cover the production cost.


Conclusion

Every Pricing strategy has its advantage and Flaws, in case Of Starbucks they have higher profit margins than their competitor and cater to needs of High income segment which are less compared to middle or low income segment. On the Other hand, Dunkin Donuts and Mac Donald’s cater to needs of the segment which is more in number by giving their Coffee Beverages at low prices and reaping Profits from it by depending on the volume of coffee sold.

Companies should identify Their Marketing objecting and decide which pricing strategy is suitable for the company.


Reference List


 

Student Name- Sapransh Jaipuria

Student Id- 215354693