COMPETITIVE PRICING

Effective pricing is essential for a business. That’s the only way they’d know at what price they should offer a product, while maintaining a good profit margin and keeping up with the competition. A business can pick from a variety of pricing strategies and the selection depends on different factors.

Pricing is one of the most important components when it comes to creating marketing strategies. The price is one of the first things that a consumer notices about a product and is one of the deciding factors when it comes to their decision to buy it or not.

When a product is priced in accordance with what the competition is charging, it’s known as competitive pricing. It is one of the four major pricing strategies adopted by most companies. The other three include, cost-plus strategy, where a prefixed profit margin is added over the total cost of the product, demand pricing, under which the price is set by establishing the optimal relationship between volume and price, and markup pricing, where a percentage is added (as profit) over the wholesale price of the product.

When it comes to competition based pricing strategy, the purchasing behaviour of customers is an important criteria. Some of the factors that companies take into account are costs, competition, and price sensitivity. In order to ensure profitable sustenance of the business, managers have to set the price such that it covers the production cost, company overheads costs, and also offers suitable profits.

The concept of competitive pricing is best understood when there are only two competing parties. Suppose, two companies manufacture detergent for washing clothes. Both will charge the same price and if one company wants to compete with the other, will advertise saying why it’s product is better.

Even big corporate giants sometimes resort to competitive pricing strategy when they want to enter a new market. They have to set the price almost equivalent to their competitor, even if the production cost is high. In case the production cost is higher, they’d have to play around and adjust prices of packaging, advertising, and distribution.

When a company is unable to anticipate competitor price changes or is not equipped to make corresponding changes in a timely fashion, a retailer may offer to match advertised competitor prices. This allows the retailer to maintain a competitive price point for those who become aware of the competitor's offer without having to officially change the price within the retailer’s point of sale system.

For example, in November 2014, Amazon projected price changes to approximately 80 million items in preparation for the holiday season. Other retailers, including Walmart and Best Buy, announced a price-matching program. This allowed customers of Walmart or Best Buy to receive a product at the lower price without risking customers taking their business to Amazon solely for pricing reasons.

For many small businesses in particular, competitive pricing results in a narrowing of profit margins. This makes the business vulnerable to a sudden rise in costs. Therefore, independent retailers competing with high-volume, big box stores may choose an alternative pricing strategy that affords them a larger cushion on their profit margin and justify it on the basis of their niche advantage -- for example, being local and customer-focused.

Disadvantages of Product Orientation

Until the late 20th century many firms were product-orientated and failed to understand the changing needs of their customers in an increasingly competitive marketplace. A major swing towards market-orientation has led to intensified marker research and product ranges carefully designed to fir customer preferences.

A product-oriented approach to business focuses on building a superior product or service, which will pull customers to you because you have what they need. This differs from a sales-oriented approach, which relies on branding and communications strategies to pull customers to you by making them believe you have something they want.

·        Obsolescence

If you focus your brand and selling message only on your product’s construction, features, cost, quality or other hard facts, a new competitor, change in technology or other market factor that devalues your current product’s selling point can put you out of business.

·        Narrow Branding

If you don’t develop a brand with a benefits message or clear image, you might be limited as to what you can sell. For example, if you sell shoes using a product-oriented approach that focuses on the construction, value, price and style of your footwear, you might have a difficult time introducing a line of handbags if that product is more of an impulse buy or one driven by taste. If your shoe business has a brand that sends a subjective message to women, you can use your position in the marketplace to introduce new products with that image.

  Low Return on Marketing
 

Companies with a product orientation spend their marketing budgets promoting products that may not meet customer needs. That means wasted expenditure on creative services and media, because companies are not communicating information that is important to the market. Basing marketing communications on research into customers’ attitudes and needs likely will improve the return on marketing investment.

 
 Loss of Competitive Advantage

Maintaining investment in existing products can hand an advantage to competitors. Companies with a strong product orientation may lose customers and market share to competitors who offer a more relevant product to the market. Declining product revenue and the loss of important customers can damage a company’s profitability and, ultimately, its survival.

·        Poor Responsiveness

A company that is not in tune with the marketplace is unlikely to be aware of changing trends and may lose business to competitors who are able to respond quickly to new opportunities. Companies must collect data that allows them to monitor and react to changing market conditions. A change may be as simple as introducing a new colour or offering a product in smaller pack sizes, but without market awareness, a company may miss the opportunity.

AMAZON INDIA MARKETING STRATEGY

Mission – “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavours to offer its customers the lowest possible prices,”

Vision- “To leverage technology and the expertise of our invaluable employees to provide our customers with the best shopping experience on the internet”

Tagline – “#Aur Dikhao” in India.

                 “From A to Z” globally.

A decade into the new millennium, India, with its billion-plus people and largely untapped e-commerce market, beckoned. The country posed a classic case of good news, bad news. The good news included a very young populace — more than 65% under age 35 — rising levels of disposable income, and ubiquitous cell phone ownership (80% of the population, by one estimate).

The bad news: 67% of the population lives in rural areas characterized by an underdeveloped infrastructure. Only about 35% of India’s population is connected to the internet. Cash, not credit cards or checking accounts, is still the rule. And, determined to protect its own, India enacted a rigid FDI policy restricting foreign multibrand retailers from selling directly to consumers online. That meant any venture would basically be a third-party seller for Indian-made products.

To respond to these challenges, after launching its Indian website in 2013, Amazon developed a program to recruit an army of suppliers and convince them it was a trustworthy partner that could help them increase the market for their products. Amazon wheeled out a program called Amazon Chai Cart: mobile tea carts that navigated city streets, serving refreshments to small-business owners while teaching them the virtues of e-commerce. The Chai Cart team reportedly traveled more than 9,400 miles across 31 cities and engaged with more than 10,000 sellers. To help these sellers get online quickly and address their objections to e-commerce, last year Amazon created Amazon Tatkal, a self-described “studio on wheels” that provides a suite of launch services, such as registration, imaging, cataloging, and sales training.

The company also localized its fulfillment platform in India by introducing Easy Ship and Seller Flex. With the former, Amazon couriers pick up packaged goods from a seller’s place of business and deliver them to consumers. With the latter, vendors designate a section of their own warehouses for products to be sold on Amazon.in, and Amazon coordinates the delivery logistics. This “neighborhood” approach is convenient for sellers and has benefited Amazon by speeding up delivery of some products.

Amazon has contracts with a number of major delivery services in the country, including India Post and cargo airline Blue Dart. Last year it set up a subsidiary, Amazon Transportation Services Private Limited, to augment delivery. And it utilizes bicycle and motorbike couriers for last-mile deliveries in both urban and rural communities. But rural areas, which often are literally off the beaten path, pose special challenges.

Instead, Amazon has enlisted mom-and-pop store owners as partners in its delivery platform. In small villages and remote areas where few people have internet access, residents can go to their local store and use the owner’s internet connection to browse and select goods from Amazon.in.

Adidas: Market or Product orientated?

Market Orientation - Market orientation is outward looking where the business focuses on market research, meaning to understand their consumers' needs and wants.

Product Orientation - Product orientation is inward looking, focusing on research and development to come up with innovative products for their market.

 
Adidas: Market or Product orientated?

Adidas has taken a more marketing approach in its development of the sports apparel industry. Adidas highlighted in its 2011 annual report that “a profound understanding of the consumer and customer” is essential to achieving their goal.

Adidas focused its investments on high-potential markets, in particular China and Russia. The company strives to “fully exploit market opportunities” by presenting their brands to the consumer in the most impactful way. In the sports industry, customers and consumers tend to know what they want (whether it be running shoes, basketball, badminton racket etc.) which makes Adidas more focused on satisfying the needs and wants of the consumer.

However, there are instances where Adidas lean towards product-orientation where they invest in their research and development to experiment with new technologies to create a lightweight shoe, or better cushioning for the soles. However, Adidas is mostly market-oriented in that the company focuses on their target market (e.g. basketball players, runners, football players, athletes of various ages etc.).

They are more market orientated than product orientated, which means they put emphasis on market research. This is shown in their 2012 Annual Report, "Inspired by our heritage, we know that a profound understanding of the consumer and customer is essential to this goal."

They "push the boundaries of products, services and processes to strengthen our competitiveness and maximise the Group's operational and financial performance". They focus on satisfying the needs and wants of their customers by continuously striving to create a culture of innovation.

At the very heart of ‘Creating the New’ is the brand Adidas. The brand is what connect them with their consumers; therefore, the success of the brand defines the success of their business. Through their unique portfolio, they cater for the needs and desires of more consumers than any of their competitors.