Question

a) Discuss the pros and cons of using price as a competitive differentiator. Which firms are best positioned to pursue this strategy?

b) Comment on the relative value of product strategy and pricing strategy in the marketing mix.

Answer 1

a) There are different pros and cons for price as using competitive differentiator

Advantages

• Fast responses - Price competitive gives your business to control over competition. If company is using latest technology or software, company can gather more information which other companies cannot gather manually. result of this, company can respond to competition in better way with the advance pricing trends. This will help company not to lose their customer due to the pricing.
• Make the customer happy - Online shoppers gives priority to pricing. Comparision helps shoppers to find the best prices. If any customer has the pricing is the important factor, they will not hesitate to look for another competitors pricing if your price is not satisfy them. So in this case we need to use pricing strategy to make the customer happy
• Useful to mix with other strategies - Online retailers should always keep the pricing as the priority and use the wide approach where pricing decides the target profit.
• Avoid loss- Some companies thinks that if they reduce their prices at cheapest cost, it will benefit them. This strategy actually explains to ramp up to price increase, improving profit percentage and still being most competitive in the market. One can track this with the help of pricing software.

Disadvantages

• Diversion from the business - If the company only focuses on the pricing, it may get diverted to other area of business like marketing. It may affect image of your company
• This is not suitable for all markets - This works in case of luxurious or premium products. In luxury market, shoppers do not care about the pricing. So if company try to be competitive in such market, they can harm their brand. So in this case, company should have the mix customer and market oriented pricing strategy
• Small organisation struggles to achieve it - Small sized or micro companies find it difficult to create resource and staff for the new technologies. Their priority is growth rather than competition.

The firms who deals with luxurious or premium products, firms which has the monopoly in the market can make the better us of competitive pricing strategy.

b) The relativity between product strategy and pricing strategy can be considered as the value based pricing. Basing a product or service's price on how much the target customer believes it is worth. The aim of this to know how much consumer is willing to pay. Pricing is depend on the features of the product. It is about how you package the product, what are the features, specification and use. Once you develop the features in the product as per the customer need, the pricing will automatically justify the product and customer will pay it willingly. If the product quality does not match with pricing, customer will not buy it. If your competitor has the same price as you, customer would be willing to pay to the one who has different product features than others. so company will have to work on this factor to differentiate their product than their competitors to validate the price.