A Study of Major Companies that Use an Effective Pricing Method

Introduction

One of the most critical business functions is pricing, or setting the monetary value of an organization’s products and/or services. It means that some important factors that determine the price are supposed to be considered, for instance, the market price level, forces of supply and demand, the cost of production (including expense), and the level of external competition. Aside from earning the company some profits, pricing is also used to penetrate a certain market or even as a skimming strategy. Other strategy roles of price include (from the perspective of the consumer) include price-quality strategy, reference price strategy, sales price strategy, price ending in nine strategies, discount pricing strategy, and finally, decoy pricing (Neu 50). All these are applied objectively so as to achieve a certain effect in the market (which reflects some degree of organizational success). Consequently, some top companies in the world are observed to use some pricing strategies to inform their prosperity in the market. As such, they have adopted the most conducive pricing strategy that reflects their needs and business goals.

Apple

Apple is the top dealer in the field of electronics, computer gadgets and accessories, and software. It is a technological firm that mainly relies on the cost-based model of pricing to value its products. The reason for this choice is informed by the high value of its raw materials and significant business costs. What is more, its manufacturing plant is located in China whereas the secretariat and showrooms are based in America (330). This leads to higher business costs which have to be factored in during price determination. One effect of this strategy is that it leads to extreme price levels, and this helps to explain why the products of Apple are very costly.

Google

Google is another major technological firm that specializes in the provision of search engine services on the Internet. It also designs and sells computer applications and gadgets. It is a major player in the industry, and is currently the market leader, closely being trailed by Facebook. According to Neu, Google depends on the competitive based pricing strategy to safeguard its market shares around the virtual market (77). It closely monitors its competitors so that it sets price levels that reflect the nature and form of competition in the search industry that is dominated by more than 10 players, including Amazon, Opera Mini, Yahoo, Wikipedia, Twitter, and others. As a result, Google’s pricing is relatively low to promote high customer retention (600).

Coca Cola

Coca Cola is a leading beverage company that has perfected the art of marketing and publicity to acquire great market shares and locks out, new players. What is more, it has choked off the growth of other players in local markets because of their pricing level and market approaches. It largely relies on a market-based pricing strategy that mainly considers the forces of supply and demand. It means that the company has to stir up its customers to ensure that there is an adequate demand level so that its supply will trigger an equilibrium price in the market (210). As such, Coca Cola is regarded as a price setter because its prices are what the market uses.

Conclusion

The companies under analysis have adopted the most convenient pricing strategy that reflects their needs and business goals. Consequently, pricing can be used to achieve a number of strategic roles, including the establishment of value, competing, diverting attention, manipulating the preferences and decisions of the consumers. There are three main pricing strategies, including cost-based, production based, and market-based. The paper has evaluated the pricing approaches of some three top 500 American fortune companies to explore the topic of discussion. They include Apple, Google, and Coca Cola.