Introduction
One of the features of the world market is the high degree of competition between enterprises, which is one of the results of developing and promoting the principles of free trade and globalization in the modern world. As a result, many products are popular and well-known in many countries under the same brand. An example is the world-famous Nescafe coffee produced by Nestle. This coffee brand appeared in 1938 and has spread to almost all countries involved in world trade. To successfully distribute a product, Nestle uses various pricing strategies. This presentation will consider and compare modern pricing strategies using the Nescafe brand.
Pricing Strategy Definition
Companies use various pricing strategies to achieve their marketing and development goals, especially in developing new markets. Usually, proven strategies or a combination of them are used, which have long proven their effectiveness. The main objective of the pricing strategy is to obtain the maximum profit when implementing the planned sales volume (Green and Keegan, 2020). The price of a product should not only be adequate for its cost and demand and allow the company to profit from each unit sold. In addition, price formation should ensure long-term satisfaction with buyers’ interests.
The Strategy of Price Discrimination
The price discrimination strategy involves setting different prices for the same product for different segments of consumers. This allows one to adjust the assortment and pricing to the needs of a particular market (Búrca et al., 2013). The Nescafe brand is actively using this strategy in developed countries, presenting a more diverse line of coffee products for customers of different income levels and preferences. At the same time, in developing countries, Nescafe’s product line is usually shorter and is represented by the brand’s classic products. This strategy is excellent for the adequate allocation of resources in large international companies that want to maximize profits while expanding their presence in global markets.
The Strategy of Price Unification
The strategy of price unification involves the establishment of the same prices for products in all countries, regardless of local conditions and competition. Many firms consider the average price strategy the fairest since it excludes the possibility of a “price war” (Usunier and Lee, 2013, p. 13). This can be effective for companies with strong brands and high customer loyalty. Nescafe is leveraging this strategy partly to keep prices low enough for its iconic classics, such as Nescafe Classic freeze-dried coffee. Its price does not differ significantly between different regions of the world. On the one hand, it helps to increase the demand for a particular product in any country, regardless of its economic situation. On the other hand, this strategy will raise brand awareness and associate its activities with a specific quality product at an affordable price.
The Low-Price Strategy
The low-price strategy is to set low prices for goods to attract more consumers. The low cost of a critical product sometimes acts as bait, prompting the user to buy a certain amount of related products (Alon et al., 2021). Using a low-price strategy is advisable to avoid bankruptcy, reloading production capacities, and when the company does not expect the sales market for its goods to exist for a long time.
Nestle is trying to maintain a stable, reasonable price for the essential products of the coffee line. However, this price cannot be called underestimated. Instead, Nescafe’s tactic is to maintain a more or less constant product value in different countries over a long period. This strategy is not decisive when choosing prices for large companies with stable profits and reputations. It may happen that the company will not be able to raise the price later, and as a result, it may incur financial losses (Albaum et al., 2016). Implementing a low-price policy is advisable if the production is mass and the costs per unit of production are rapidly decreasing with sales growth. The policy of low prices is effective in a price-sensitive market and unacceptable for inelastic demands.
The Price Skimming Strategy
The price skimming strategy involves establishing a reasonably inflated price for a product when it first appears on the market. This is because buyer demand for new products in a category is usually high enough to generate more profit the first time after launch (Abid, 2022). This strategy is often used by celebrity brands or products of elastic demand (techniques, perfumes, and cosmetics). This pricing strategy is generally not very typical for the Nescafe brand and can only be used when launching fundamentally new products, such as decaf coffee.
Conclusion
In conclusion, pricing strategies are essential in doing business and public policy. Thus, the main pricing strategies are the strategy of price discrimination, the strategy of price unification, the low price strategy, and the price skimming strategy. Nestle’s Nescafe brand is a recognizable product worldwide and uses a combination of different pricing strategies, taking into account the characteristics of local sales markets. This allows the brand’s products to be the leading supplier of affordable coffee worldwide for many decades.
Reference List
Abid, H. (2022) “A review on the most common pricing strategies,” International Journal of Finance, Insurance and Risk Management. Web.
Albaum, G.S., Duerr, E. and Josiassen, A. (2016) International Marketing and Export Management. Upper Saddle River: Pearson.
Alon, I. et al. (2021) Global Marketing: Contemporary Theory, practice, and cases. New York Routledge.
Búrca, S.de, Fletcher, R. and Brown, L. (2013) International Marketing an SME perspective. Harlow u.a.: Financial Times Prentice Hall.
Green, M.C. and Keegan, W.J. (2020) Global marketing. Upper Saddle River (NJ): Pearson education.
Usunier, J.-C. and Lee, J.A. (2013) Marketing across cultures. Harlow, England: Pearson.