Pricing Strategies Analysis Essay Example
Pricing Strategies Analysis Essay Example

Pricing Strategies Analysis Essay Example

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  • Pages: 4 (896 words)
  • Published: April 7, 2017
  • Type: Case Study
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The practice of Pricing Strategy is utilized by businesses to boost profits, attain a competitive advantage, or achieve business objectives. This marketing matrix element can be leveraged to great effect. A carefully crafted pricing strategy can significantly improve your company's competitiveness. MOUAWAD (2007) explored the reasons for recent oil price fluctuations from Saudi Arabia and their consequences in the article "Saudi Officials Seek to Temper the Price of Oil".

Based on the current market situation, the Saudi Arabian government lowered their oil price from $77 to $50 last year and recently increased it from $50 to $55 compared to other oil players. This was deemed a moderate price increase and crucial for not hurting their own economy and the global economy. However, the author contends that the real reason behind Saudi Arabia's decrease in oil prices was to curb the economic aspirations o

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f Iran in the Middle East.

The pricing strategy of the Arabs had political implications, as evidenced by their actions during the 2006 oil price fluctuations. While Saudi Arabia benefited from these changes, developed nations suffered negative consequences, such as decreased sales for large US automobile manufacturers due to consumer preferences for smaller, energy-efficient vehicles. Nonetheless, the Arab countries capitalized on this situation because they hold a dominant position in the global oil market. This demonstrates that the Arabs sought not only to earn profits but also to pursue objectives that would boost their revenue.

Next, I will categorize the pricing strategy used by Arabs. Dr. Ralph F. Wilson also emphasizes the significance of pricing strategies in E-commerce in a separate article on pricing principles. His article underscores the need for "pricing objectives," which are divide

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into two categories. The first is short-term profit maximization.

Wilson (2000) suggests that there are two key strategies for increasing profits in sales: charging premium prices to customers to maximize profits, and gaining market share by offering lower prices relative to competitors to attract a larger number of buyers. Both approaches aim to increase revenue and ultimately, maximize profits.

Setting your pricing scheme should take into account consumer demand, a major player in determining market price according to economics. Newsweek conducted a study where they priced their newspapers at different levels in various American cities, revealing that even a small decrease in price led to a significant increase in sales (Wilson, 2000).

Businessmen need to take into account the long-term impact of setting low prices. Lowering prices may not always be beneficial, especially if the company's goals are focused towards the future. It is important to remember that reducing prices does not guarantee an increase in customer attraction, as there are various factors that affect their consumption, such as personal preferences, financial resources, availability of substitutes and more.

One article explored the challenges of pricing electronic publications and emphasized the importance of price and its desirable qualities. The author, Colin Day, posed a question regarding whether cost recovery is an appropriate basis for setting prices (1994). Day believed that relying solely on recovery cost to determine pricing could hinder innovation, development, and progress. Pricing electronic publications presents a challenge because publishers often create multiple products and not all operating expenses can be directly attributed to each product. Therefore, a successful pricing strategy is required to achieve profitability and ensure future investments and supply. Price plays a crucial role in

these outcomes.

Day suggests that although customers may be attracted to a low price, its efficacy is limited. He advises businesses to consider customer preferences such as brand and reputation when setting prices, especially if they are new to the publishing industry. As we have previously noted, pricing plays a crucial role in business success. In this article, we will compare the pricing strategies of the three aforementioned articles.

According to Mouawad, the pricing strategy employed by Arabs had political motivations and was aimed at influencing their competitors through "penetration pricing," which involves setting low prices to gain market share. Similarly, Wilson and Day also utilized this tactic to attract customers and generate high revenue. However, unlike the other two examples, Arab pricing took into consideration consumer welfare.

In 2006, the Saudi Arabian government attempted to mitigate the oil price increase, which could have negatively impacted the global economy. However, Wilson and Day's pricing strategy prioritizes profit maximization over societal welfare. Additionally, Mouawad's pricing approach factors in political influences that indirectly affect the oil industry, while Wilson and Day solely prioritize profit. The text also outlines various pricing tactics and their definitions.

The practice of skimming pricing is based on the concept of charging higher prices for products that are either innovative or produced by major players. For instance, in 2006, Saudi Arabia employed this strategy to enhance the price of crude oil globally.
On the other hand, prestige pricing entices customers towards expensive items through implying that they have superior quality. Brands such as Levi's, Gucci, Calvin Klein and others use this technique.

Charging varying prices for an identical item dependent on a customer's financial status is known

as price discrimination. This technique is frequently employed by companies providing payment plans and insurance providers. To achieve business success, it is critical to evaluate numerous elements, including pricing, alongside other marketing factors.

There is no foolproof pricing strategy, but it's important to reduce risk and assess market conditions even in the face of difficulties. (Source: http://www.wilsonweb.com/wmt5/plan-pricing.htm)

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