The importance of Pricing
The price a business charges for its product or service is one of the most important business decision that management makes. For example, unlike the other elements of the marketing mix (product, place & promotion), pricing decisions affect revenues rather than costs. Pricing additionally has an essential part as a focused weapon to enable a business to misuse advertise openings. Pricing likewise must be predictable with alternate components of the marketing mix, since it adds to the view of a product or service by customers.
Coca-Cola
Coca-Cola or popularly known as co*ke, is a world famous carbonated soft drink. Coca-Cola dominated the world’s soft drink market throughout the 20th Century. The main ingredients of the drink are hidden in its name – Coca leaves and Kola nuts i.e. a source of caffeine. In view of Interbrand's "best worldwide brand" investigation of 2015, Coca-Cola was the world's third most profitable brand, after Apple and Google. In 2013, co*ke items were sold in more than 200 nations around the world, with shoppers drinking more than 1.8 billion organization refreshment servings each day.
Pricing Strategy used by Coca-Cola
There are three different pricing strategies which a company can primarily follow:
1)Price Skimming: Charging premium prices initially to earn maximum revenue.
2)Market Price: Setting price as going market rate (by competitors)
3)Market Penetration: Charging lowest price to achieve highest possible sales.
To first decide its price, they utilized a cost-based estimating framework for its Original co*ke. They initially composed the item, the first co*ke, decided the expenses for the (item costs, capital expenses, and operational costs), set a cost considering the cost of co*ke, lastly persuaded the customers of the pop's esteem. From that point, co*ke utilized market-entrance evaluating at its cost. At present, Coca Cola items to meet the opposition against significant players like Pepsi, items valuing is set around a similar level of rivalry. In this way, their essential methodology is Market Price since they trust cost ought not be too low or too high than the value contender is charging from.
Coca-Cola uses the following alternate pricing strategies over the year for co*ke:
1)Psychological Pricing
In 2009, Coca-Cola utilizes the psychological estimating system for their Original co*ke. For example, the cost of a 2-liter jug of Original co*ke was $2.49. They set the cost to end in 9, since this influences clients to think the cost is under $2.50, to speak to the client.
2)Promotional Pricing
co*ke also uses the promotional pricing strategy. Coca Cola has offered promotional prices as often as possible. In store that offer Coca-Cola, costs are regularly incidentally valued underneath the rundown cost to build short-run deals. Particularly on some event Coca Cola diminishes its rates like in Ramadan Coca Cola decreases its rate unto 5 Rupees on 1.5 litre container. It gives the item a feeling of criticalness and customers buy the item in view of the lower cost. Coca cola organization offers motivations to middle men or retailers in way a that they offer them free example and free purge bottles, by this these retailers and centre man push their item in the market. Also, that is the reason coca cola seen more in the market.
3)Segmented Pricing
co*ke uses the segmented pricing strategy. Based on different packages, Coca Cola is available at different price. By their product in different sizes and at different costs, they get to increase their revenue, because there is not much difference in the costs required to produce the products. Following are the different packages available for different target audience:
i)RGB - Returnable/ Refillable Glass bottles
ii)PET – Plastic Bottles
iii)CAN – Aluminium Cans (Tins)
iv)Tetra – Tetra Packs
v)BIB - Beverages in bag
Following are different prices for different sizes:
4)Discriminatory Pricing
Discriminatory Pricing co*ke also follow discriminatory pricing strategy, because they have different pricing when sold through different channels. Following are the different channels where it is charged differently.
·Wholesalers/ distributers
·Retail/ corner stores/ super markets
·Restaurants/ cafes/ night clubs
·Petrol stations
·Automated teller machines (AMTs)
Coca Cola is sold through following ways:
1.Direct Selling: In this type of selling their products are supplied in shops and departmental stores by using their own transports. In this type of selling company have more profit margin.
2.Indirect Selling: In this type of distribution, they have their whole sellers and agencies to cover all area to assure their customers for availability of Coca Cola products.
1)International Pricing
co*ke additionally utilizes the international pricing strategy. For example, the cost of a 2-liter container of co*ke in the United States is unique in relation to the cost of a similar item in China. This needs to do with the distinction in financial conditions, aggressive circ*mstances, and laws. Along these lines, Coca Cola has been following different evaluating procedures in view of the necessity and considering the presentation of new items focusing on various gathering of people.
Cold War between Coca Cola and Pepsi
Cola Wars between Coca Cola and Pepsi Soft drink holds 51% (dominant part of piece of the pie) of the aggregate refreshment advertise. Soda can be additionally isolated into carbonated beverages (Coca-Cola, Pepsi, Thumbs up, Diet co*ke, Diet Pepsi and so on.) And non-carbonated beverages (Orange, Cloudy lime, Clear lime and Mango). The predominant players in soda pop market are Coca Cola and Pepsi, which possess for all intents and purposes the greater part of the North American market's most generally circulated and best-known brands. They are overwhelming in world markets too.
Pricing Strategy used by Pepsi v/s Coca Cola
PEPSI: It has reliably used its valuing technique as an encouragement to test, expecting to transform trial into habit. It propelled the 500-ml bottle in 1994 at Rs.8 versus ThumsUp's Rs.9. Its 1.5-liter container took after co*ke into the commercial centre at Rs.30 – Rs.5 not as much as co*ke's. Pepsi raised the cost once utilization balanced out, depending on the propensity to adjust at the absence of a cost advantage. It could proceed with bring down value situating because of the way that in the soda pop industry the retailers infrequently pass on the organization the value favourable circ*mstances picked up by them from the shoppers by offering contending brands at a similar cost and taking the rebates.
COCA COLA: Initially co*ke mimicked Pepsi by introducing 300 ml cans at an invitation price of Rs.15 before raising it to Rs.18. When it realized that the brand did not hold enough attraction to fork out a premium from the consumers, it introduced a lower-priced, similar-sized version to gain consumers
It can be derived from the above article that Coca-Cola and Pepsi are perfect substitutes and henceforth the evaluating procedure of one specifically impacts the interest for the other item. Subsequently, the lack of interest bend of Coca-Cola and Pepsi would be a straight line with parallel inclines over all focuses on hold.
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FAQs
The pricing strategy of Coca-Cola is what they refer to as ”meet-the-competition pricing”: Coca-Cola product prices are set around the same level as their competitors, because Coca-Cola has to be perceived as different but still affordable.
What are Coca-Cola's pricing strategies? ›
The pricing strategy of Coca-Cola is what they refer to as ”meet-the-competition pricing”: Coca-Cola product prices are set around the same level as their competitors, because Coca-Cola has to be perceived as different but still affordable.
What is the pricing discrimination strategy of Coca-Cola? ›
Coca-Cola mainly used three kinds of pricing strategies name price skimming, market price, and market penetration. The name they given to their strategy was meet-the-competition pricing. They used lower prices to penetrate into the new market and gradually... See full answer below.
What are the 3 key strategies of Coca-Cola? ›
The Coca Cola marketing strategy primarily includes SEO, email marketing, content marketing, and video marketing.
Is Coca-Cola competitively priced? ›
Even though the coca-cola brand is widely known, they price all their products competitively (Product mix). Though competition is the major reason the Coca-cola brand uses this strategy and other marketing dynamics, another key reason for employing this strategy is to make their products more accessible and affordable.
What brand strategy does Coca-Cola use? ›
Brand Over Product
Instead of going for a complicated marketing plan that focuses on each product, Coca-Cola sells the lifestyle, the emotion, and the association of the brand that people can relate to. It ensures that the brand is universal and understood across all cultures and languages.
What strategies Coca-Cola used for selling their brand? ›
Portfolio Marketing:
The Coca-Cola brand grew by introducing multiple new products into the market. They managed to keep their portfolio limited to beverages like juices, teas, coffees, and soft drinks. This also helped them reach more customers with different preferences and tastes for soft drinks.
What is Coca-Cola differentiation strategy? ›
Coca-Cola has created differentiation using a soft sell approach and has positioned itself on the following standards: # Corporate reputation for quality and innovation: one of the best place to work- This would attract a pool of workers of the highest caliber, thus leading to more value induced into the company.
What is an example of price discrimination pricing? ›
Examples of Price Discrimination
One example of price discrimination can be seen in the airline industry. Consumers buying airline tickets several months in advance typically pay less than consumers purchasing at the last minute. When demand for a particular flight is high, airlines raise ticket prices in response.
What is price discrimination pricing strategy? ›
Price discrimination is a sales strategy of selling the same product or service to different customers for different prices. First-degree price discrimination involves selling a product at the exact price that each customer is willing to pay.
Pricing is affected by various factors and these include competitor prices, cost of inputs, marketing costs and economic factors such as inflation. In this article, we come across a number of factors that affect Coca Cola's pricing strategy, these are economic factors such as inflation and the cost of inputs.
What are the 4 P's of Coca-Cola? ›
Marketing Strategy of Coca Cola analyzes the brand with the marketing mix framework which covers the 4Ps (Product, Price, Place, Promotion).
What is Coca-Cola secret formula marketing strategy? ›
However, the company's "secret formula" policy is more of a marketing strategy than an actual trade secret: any competitor in possession of the genuine co*ke recipe would be unable to obtain key ingredients such as processed coca leaf, and even if all components were available, could not market the product as Coca-Cola.
Why does Coca-Cola cost more? ›
Coca-Cola has raised prices to offset inflation but said the increases did not affect demand for its drinks during the fourth quarter. Revenue rose 7% to $10.1 billion, the company said Tuesday. Pricing and the mix of beverages contributed 12% to revenue growth, while concentrate sales rose 2%, co*ke said.
Why has Coca-Cola gotten so expensive? ›
But co*ke saw consumers start to trade down to smaller package sizes or private-label competitors to cut costs last year. Companies have blamed the price increases on everything from the rising prices of aluminum, increased employee wages and hoarding habits during the pandemic.
Why was Coca-Cola so cheap? ›
The Coca-Cola Company was able to maintain this price for several reasons, including bottling contracts the company signed in 1899, advertising, vending machine technology, and a relatively low rate of inflation.
What is the strategy statement of Coca-Cola? ›
make a difference.” Its vision and mission are to “craft the brands and choice of drinks that people love, to refresh them in body & spirit. And done in ways that create a more sustainable business and better-shared future that makes a difference in people's lives, communities, and our planet.” What is this?
What is Coca-Cola New One brand strategy? ›
In 2016, Coca-Cola launched a new “One Brand” global marketing strategy that, for the first time ever, unites Coca-Cola, Diet Coca-Cola, Coca-Cola Zero, and Coca-Cola Life under the iconic Coca-Cola brand positioning in one global creative campaign, “Taste the Feeling.”
What is the competitive strategy of co*ke and Pepsi? ›
While Coca-Cola determines entertainment, optimism, and passion as the main concepts to promote the product, PepsiCo focuses on the other segment of the target audience, emphasizing the idea of the healthy lifestyle and high-quality nutrition.
Does Coca-Cola use a push or pull strategy? ›
Coca-Cola used a push strategy for years before realizing that instead of focusing on moving beverages through a retailer's back door and into their warehouse, it needed to help them sell to shoppers through the retailer's front door". College textbook publishers are in a similar position today.
Different Types of Price Discrimination
- First Degree Price Discrimination. ...
- Second Degree Price Discrimination. ...
- Third Degree Price Discrimination. ...
- #1 Imperfect competition. ...
- #2 Prevention of resale. ...
- #3 Elasticity of demand. ...
- The Firm. ...
- The Consumer.
Businesses like Amazon and the publishing cartel only care about the bottom line. Walmart and Amazon abuse their market power by extracting discriminatory prices from their suppliers. This price discrimination is one of the key tools that dominant firms use to undermine rivals and extract excess profits.
What is an example of price skimming? ›
Price skimming examples
Electronic products – take the Apple iPhone, for example – often utilize a price skimming strategy during the initial launch period. Then, after competitors launch rival products, i.e., the Samsung Galaxy, the price of the product drops so that the product retains a competitive advantage.
What is the difference between price differentiation and price discrimination? ›
Product differentiation is the process used to distinguish one company's goods and services from another company's goods and services. Conversely, price discrimination is a strategy used to distinguish prices for the same goods and services.
What is price discrimination vs dynamic pricing? ›
The difference between the two is what they are based on. Dynamic pricing is based on market conditions at that given moment and on the other hand, price discrimination is based on customers' characteristics.
What is price discrimination and why do companies use it? ›
Price discrimination is the practice of charging different prices to different people for the same goods or services. It's a way for a business to try to maximize sales, often by targeting its pricing based on how much different people are willing to pay.
What is the five forces model of competition for Coca-Cola? ›
The five forces are (1) Threat of New Entrants, (2) Threat of Substitute Products or Services, (3) Bargaining Power of Buyers, (4) Bargaining Power of Suppliers, (5) Competitive Rivalry Among Existing Firms.
Is there promo pricing in Coca-Cola? ›
co*ke also uses the promotional pricing strategy. Coca Cola has offered promotional prices as often as possible. In store that offer Coca-Cola, costs are regularly incidentally valued underneath the rundown cost to build short-run deals.
What pricing strategy does Pepsi use? ›
PepsiCo has a diversified product portfolio encompassing the food, snack, and beverage industries. PepsiCo typically prices its goods based on consumer demand and demographics.
Why is co*ke so expensive 2023? ›
The Coca-Cola Co. plans to raise prices again in 2023 against some retailers' calls to roll back increases, arguing it has “earned the right to price with the consumers” through enhanced marketing and an agile packaging approach that balances premium and small entry-level, pack-sizes for broader consumer appeal.
Answer and Explanation: Bottled water generally comes with a greater markup compared to soda in the markets which is due to numerous factors such as consumer perception regarding bottled water, the inefficiency of public services, health concerns, etc.
Why is a 20 oz co*ke so expensive? ›
A 20-ounce litter bottle can cost more than a 2-liter bottle because of the preferences of individuals. People buying the 20 once bottle often have inelastic demand because they are buying or immediate consumption.
Is co*ke more valuable than Pepsi? ›
The market cap is the value of all of the company's stock combined, giving you a sense of what value investors are placing on the company based on the price it is trading at. As of February of 2023, Coca-Cola had a market cap of $259.46 billion whereas Pepsi had a market cap of $243.17 billion.
Who buys Coca-Cola the most? ›
Mexicans are the largest consumers of co*ke, and consumers in the country drink 745 co*ke beverages a year. After “o*k”, “Coca-Cola” is the second most-known phrase in the world. Coca-Cola has a product portfolio exceeding 3,500 beverages and 500 brands.
Is Coca-Cola most expensive brand? ›
With a brand value of over 35 billion U.S. dollars, Coca-Cola was by far the most valuable non-alcoholic beverage brand in the world in 2022. Pepsi ranked second that year, with a value of around 21 billion U.S. dollars.
Where is co*ke cheapest in the world? ›
A cup of co*ke—or Sprite, or Thums Up—sold at Rs5 ($0.07) in rural Gujarat of western India is the “cheapest, most accessible co*ke you can probably buy in the world,” James Quincey, the company's president and chief operating officer, told investors earlier this month.
How much does it cost Coca-Cola to make one bottle? ›
It costs roughly $0.30 to manufacture one 20oz bottle of soda. Vending companies buy those bottles in cases of 24. The cost per case varies among bottlers, but, generally speaking, suppliers pay about $21 per case.
Why is co*ke Zero more expensive than co*ke? ›
It Is Not The Cost Of Production
Coca-Cola states that co*ke Light and co*ke Zero use the same sweeteners but have a different flavour base. With generally similar ingredients, any cost difference is negligible.
What type of pricing strategy does PepsiCo use? ›
Most of PepsiCo's products are priced based on the market-oriented pricing strategy. The company's objective in using this strategy is to ensure that its prices are competitive, based on other firms' prices and prevailing market conditions.
What are the pricing strategies in marketing? ›
There are a variety of pricing strategies available. Price skimming, Pricing for market penetration, premium pricing, economy pricing, bundle pricing, value-based Pricing, and dynamic Pricing are a few of them. Price determination involves assessing the business and competitors' goals and consumer preferences.
What are the 4 major pricing strategies? Value-based, competition-based, cost-plus, and dynamic pricing are all models that are used frequently, depending on the industry and business model in question.
What is an example of a pricing strategy? ›
For example, let's say you sold shoes. The shoes cost $25 to make, and you want to make a $25 profit on each sale. You'd set a price of $50, which is a markup of 100%. Cost-plus pricing is typically used by retailers who sell physical products.
What is the most pricing strategy? ›
Value pricing is perhaps the most important pricing strategy of all. This takes into account how beneficial, high-quality, and important your customers believe your products or services to be.
What are the 5 C's of marketing Coca-Cola? ›
This is a detailed 5C analysis of Coca-Cola which evaluates how five important factors i.e. company, competitor, customer, collaborator, and climate impact on the operations and strategies of the Coca-Cola company.
Why is Coca-Cola marketing successful? ›
Much of Coca-Cola's advertising success comes from the way they present their brand. Instead of focusing on the actual product, they emphasize the feeling and camaraderie of making the brand part of one's identity.
What 3 strategies are used for pricing products? ›
3 Major Pricing Strategies: A Short Guide
- Cost-Based Pricing.
- Value-Based Pricing.
- Competition-Based Pricing.
A consumer pricing strategy is a tool that business professionals can design and implement to establish the best price for a product or service. Business owners who sell both goods and services can implement a consumer pricing strategy to maximize their profits.
What are consumer pricing strategies? ›
Generally, there are three main approaches when companies are setting their product and pricing strategy: Maximization: maximizing the price the customer will pay. Penetration: pricing low to win market share. Skimming: charging higher prices for early customers and lowering prices over time to expand the target market.
