Marketing Strategy
A marketing strategy implies the line of approach that an organization pursues to maximize opportunities with the aim or goal of increasing sales and to attain competitive advantage. It (marketing strategy) includes all short, medium and long-term activities that aim at achieving the desired goals of competitive advantage and increased sales (Peter, Olson & Grunert, 1999, p.333). Pricing, on the other hand, is the most direct approach that a firm/company uses to communicate with the clients or customers. Pricing strategy is the most difficult pillar of marketing to implement. This is so because it integrates vertical and horizontal decision making in the organization or firm/company. Thus, the firm or the manager is always faced with a dilemma on how to set the price level. For instance, very low price may make the brand be reduced to a commodity; a high price, however, may lead to losses because it is unlikely that clients and the customers will pay for high prices when there are alternatives.
Some the best pricing strategy include, price anchoring- selling a $2000 item say watch next to a $10000 watch, reframing product’s value, bundling commonly bought commodities and contextual pricing- involve knowing the place and time to set the price level at whatever value. Skimming as a pricing technique is commonly used when a company wishes to sacrifice high sale and settle for high profits, that is sell a few goods for a very high price, returns will be high but sales will be low. Electronic companies are the most known to offer discounts or freemium services. For instance when a customer buys a computer, then he or she is given free games as additions to the computer bought. Then the computer game or application is a freemium service. Thus, the company’s pricing rationale is based on the available pricing strategies, context (market geographical position-high rise neighborhoods are charged relatively higher prices as compared to other areas).
Competitive advantage basically implies a firm’s ability to offer the same services as the competitors but at a lower price and still satisfy the customers’ needs and make reasonable profits or charge higher prices than the competitors but through product differentiation offer more value. For the purpose of this essay, I will discuss competitive advantage in relation to pricing (Kotler, 2011, p.133). This kind of benefit stems from cost leadership strategy. This is a case whereby, a company produces units at a relatively low price thus can sell the products at a lower price than the competitors sell and still make a profit. This could be due to ownership of strategic raw material. The idea is to maintain profits at lower prices rather than drain other firms’ returns by coercing them to reduce their prices; this is a challenge in this line of thought. This strategy works when a company offers lower prices on key items with high customer price-awareness or sensitivity and charges a higher price on a commodity with less customer sensitivity on price. This would mean that customers come to a firm for the low prices on “key” items but at the same time pay for the other non-discounted commodities.
Alternatively, a firm can pursue differential advantage. This is so when the firm offers highly differentiated good or service and other competitors have not ventured into the same. Here skimming as a pricing strategy could prove more useful. By the firm offering highly differentiated service or good, while charging high price it will still enjoy the profits because the customers would frequent the store or firm for the extra-ordinary service or good.
The company can equally merge with other companies in the same line of production to form a bigger corporation. Here risks and returns will be shared in equal measure. Therefore, to stamp authority in foreign soil, a company can merge with others to form a stronger market contender.
Conclusion
In the above essay, I have highlighted the benefits of competitive advantage in relation to pricing strategies. They are different pricing techniques relevant to the contextual perspective of market position. The company has continued to use decoy pricing that is putting one commodity with different price levels in the same shelf or place. This lower price good acts as an automatic bargainer so that the customer would appreciate the cut of the price even without further probing.
References
Kotler, P. (2011). Reinventing marketing to manage the environmental imperative. Journal of Marketing, 75(4), 132-135.
Peter, J. P., Olson, J. C., & Grunert, K. G. (1999). Consumer behavior and marketing strategy (pp. 329-48). London: McGraw-Hill.
