Pricing

1. What methods can a company use to influence competitive behavior?

A: Pricing is a critical element of the marketing mix which also includes product, place and promotion. Pricing strategies must be devised to represent the value of the product, the perceptions of customers and a relative position against other competitive alternatives available in the market. Making sound pricing decisions is critical for small business success. Some companies build sustainable product advantages for commodities sometimes by luck, moving first on a new idea, by winning a patent, by gaining economies of scale, or by preempting the best locations and are carved out of the efficient management of a firm’s value chain. The key to achieving sustainable profitability is to manage the business for competitive advantage. Many companies build sustainable product advantages by advertising, promotions, adding new features, improving the quality of the product compared to that of their competitors. Their main goal is to add to the total value of the product.

For example, I have been banking with USAA since 1994. They sustain their product advantages by offering their segment (some military affiliation) a great product and services. They offer free basic checks, interest on all balances over $5.00, cash back on all check card purchases, free postage paid envelopes, and refund of ATM charges up to $15.00. They also offer free car and home buying services for their members at great rates.

My second example is Hilton Hotels. I travel a lot and I’m a Diamond member. With any level of membership at Hilton, they pride themselves on customer service. I specifically like the fact that they go out of their way to ensure I have a great stay each time I am on their premises. Because of the level of my membership, I get extra amenities such as free upgrade to my room if it’s available at check-in without additional cost to me, the consumer. Lastly, I can’t forget Lexus and their offer of...