Analyzing a Pricing Strategy - Essay Example

?Topic:  Analyzing a Pricing Strategy Pricing Strategy of a Company The fate of any business firm is decided by the pricing strategy formulated by it, according to its product’s nature and market value. Both Large and small firms equally maintain a pricing strategy in order to sustain in the business market. However for small business enterprises, pricing strategy is very significant as it decides their sustenance and profitability in the market. Mostly the business firms set a lower pricing strategy for their products in order to capture the business market and compete with their rivals. a) Pricing Strategy Analysis of International Company “Givenchy”. The company chosen here for the pricing strategy analysis is “Givenchy” which is a world renowned firm for perfumes and luxury goods. This company has maintained its market value and product quality since years and their pricing strategy is well balanced with their customer demand and need. The customers are the life of any business and their needs and demands are evaluated by studying the market segmentation and their value attribution. The Company’s pricing strategy is entirely formulated with the aim of delivering highly qualitative products which can be identified as the status symbol of wealthy people. The company has different product line as perfumes, clothes, jewellery and other fashion accessories. The company has a phenomenal product value among the world wide consumers and for the very same reason it does not compromise much on its pricing. This is because the price of the product is which conveys the consumers about the value and quality of the product. 1. How well does the company create value for its market segments? Explain. A. Market segment is a sub set of consumer market, which caters to the profitability of a firm. A company creates value for a market segment by adding advantages and benefits to their products in accordance with customer tastes. Givenchy is an international firm which manufactures branded goods and luxury items and hence its customers are mainly aristocrats and wealthy population. Here the value for products is given by attributing quality and uniqueness to product they sell. This is because the wealthy consumers look primarily for a product which is of outstanding quality with extra – ordinary features. Givenchy being a renowned luxury brand creates value for their product in the international market by establishing their brand image, quality consistency and status symbol quotient. In order to create product value in their market segment, the company makes use of various endorsements, promotional offers, discounts and advertisement campaigns. The endorsement of Givenchy products are done by international celebrities who are considered as fashion icons and divas. This ensures the consumers that the Givenchy product lines are highly in vogue and have the characteristics of unique designer wear. Moreover, advertisement is considered as the potential means of creating brand image and value among market segments. Givenchy employs top rated models for their products launch and as their brand ambassadors. This delivers the consumers a message that the product is of exquisite standard and flamboyance. Additionally, the sophisticated company website and services offered, re-instates their product value and brand image among its consumers worldwide. 2. Does the company use different price offerings for different market segments? Describe these and evaluate how effective they are. A. “Givenchy” being an international brand has well planned strategies to absorb effectively into the global market. The pricing strategy of a company is based on a market research performed by the company in different market segments. A company keeps in mind, the demand for a particular product, competitor’s price, purchasing power of the customers and the good will of the product to formulate a viable pricing strategy for their products. Even though, Givenchy has wide market segments around the globe, there price offerings are more or less similar for all of their market segments. This is practiced in order to sustain their brand value and the “fairness” aspect of the product value. This price indifference in the pricing strategy of “Givenchy” is effective enough as it gives a popular brand identity to their luxury items. It is very essential for “Givenchy” as an international firm to maintain a universal brand identity in order to capture the customer confidence and satisfaction. To formulate an appropriate pricing strategy, a company needs to collect and gather ample information about its product value in the various market segments around the globe. Customers are basically price sensitive, and “Givenchy’s” high price is relevant with its classic quality luxury products. However, the company does provide price offering like discounts, promotional offers on special occasions and economic downturn events. 3. Explain how the company communicates both value and price. A. The products of every company connect with the consumers emotionally as well as rationally. Moreover a product provides financial security and good will to a firm. So it can be stated that a product is the heart and soul of a firm. Hence, price attached to a product communicates to the consumer about its real worth and value. However, just having a high price does not conclude that a product is of high value. It is essential for the consumer to acknowledge rationally and emotionally the value of a product through its correspondence with the company offering the product. Here, Givenchy is an international luxury brand and they communicate about their product value and price through advertisements, fashion weeks, celebrity endorsements and Internet websites. Consumers are highly price sensitive and socialites and wealthy people look in for products which are high priced as they expect qualitative products with brand identity. As every other luxury brand, Givenchy launches their product in fashion weeks in cosmopolitan cities around world. They promote their products to socialites in Italy, France, New York, London and other major fashion hubs through haute couture fashion weeks. Moreover, Givenchy’s website is a main point where consumers can inform themselves about their product value and price. Also advertising media like television, hoardings and movies promote their luxury brands among consumers. Givenchy also communicates about their products in fashion magazines and in their promotional offers at Givenchy’s outlets. 4 .Give examples of how the company develops policies for price objections, price increases, economic downturns, or promotions. A. Every company has certain policies and strategies for price objections, price increase, economic downturns or promotions. Price objection is a concept of dilemma for every company and dealing with it is possible only if certain policies and plans are formulated to face it. Every customer demands a discount or reduction in price which puts a situation of “Price fright” in selling situation. One of the effective way in which Givenchy develop price objection policy is by analyze the selling techniques of the sales people and the customer’s response on their product’s price. In case of price increases, Givenchy formulates their policies by comparing their product price and quality with that of their competitors. The company also looks at the sales volume of the company which reflects on the demand the Givenchy’s products enjoys in the global market. In event of an economic downturn, the company analyzes the production cost incurred by the firm and spending power of the consumer to formulate a well developed policy. Many a times, in the event of economic downturn and recession, the company introduces discount offers and reduced price to its wholesalers, retailers and individual customers. Since price is crucial in the survival of a company, Givenchy evaluate the customer choice, demand of the product, face value of their company and cost of production in developing their pricing strategy. Read More