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Introduction
Businesses rely on pricing strategies to maximize their sales and profits. Marketers consider various factors before determining the best pricing method, such as existing conditions, actions of the competitors, input costs, and trade margins. The selected product for this discussion is that of a luxury car. This paper gives a detailed analysis of the choice using these three pricing strategies: value-based, competitive, and cost-plus.
Analysis of Pricing Strategies
Value-Based Pricing
This pricing model depends on the worth of the targeted item or service. For the case of a luxury car, the buyer is aware of the value of the product and its ability to meet the intended demands. The choice of this product would be an advantage to this pricing strategy. First, luxury cars are designed in such a way that they fulfill the expectations of different potential customers (Athwal et al., 2019). The buyer will be willing to part with a specific amount of money to acquire a vehicle that delivers comfort and performance. Second, the selected pricing strategy resonates with the product since they both fit with the perspective of the targeted customer. The individual will make comparisons in the market and select the most appropriate offer that will fulfill his or her needs.
Third, the marketing and manufacturing of luxury cars is a lucrative business concept since many customers tend to be specific in their choice. Consequently, they will remain focused on the available prestigious cars in the market before making their final purchasing decisions (Walker, 2020). Every company relying on this strategy will, therefore, have to identify new ways of remaining profitable and acquiring additional resources to expand the business. This analysis reveals that the use of value-based pricing is a superior approach for supporting the successful marketing of the selected product.
Competitive Pricing
The business of selling luxury cars is capable of delivering positive returns to different manufacturers and marketers. Such entrepreneurs can benefit from the use of competitive pricing since it allows them to monitor the decisions and actions their immediate rivals implement. However, such an approach could be disadvantageous to the selected product in several ways. The first one is that luxury cars tend to have diverse features and technologies depending on the research and development (R&D) practices the manufacturing company puts in place. Customers will also consider specific offerings and systems in the targeted cars (Athwal et al., 2019). These attributes explain why the use of a competitive strategy could force a specific company to sell its vehicles at lower prices in comparison with the recorded costs of production. This scenario means that the company will be unable to achieve a long-term competitive advantage.
The second aspect that reveals that a luxury car is a con to competitive pricing is that every product in the automobile industry will have different features, innovations, and technologies. The market has several brand names that have been competing with each other for decades, including Mercedes Benz, Audi, Bentley, Aston Martin, BMW, and Lamborghini (Walker, 2020). When competitors replicate prices, chances are high that the overall sales would ensure that more companies do not maximize buyers confidence. Consequently, some of the corporations will find it hard to convince potential customers to purchase their luxury cars. This relationship between the selected product and the pricing model explains why only a few car brands succeed in the global market today.
Cost-Plus Pricing
This pricing strategy is one of the most common in retail settings. The marketer or manufacturer will use a fixed ratio or percentage to determine the best price depending on the overall cost of production (Athwal et al., 2019). Companies can rely on this technique to boost sales and increase the level of customer loyalty. For the selected product, it is agreeable that it will be a disadvantage for this pricing strategy. First, a cost-plus method is quite simple and fails to consider the prices different competitors offer. Companies and marketers will only focus on the costs incurred and add a specific percentage to arrive at the most appropriate marketing price. This approach means that some of the existing players will take advantage of the decision to boost sales.
Second, customer demand remains a critical aspect in the entire marketing process. A luxury car priced using this strategy might remain less attractive to the targeted buyers. Such individuals could find the item less attractive simply because the price is unconvincing (Loureiro & Kaufmann, 2016). The result is that the business will record a reduced volume of sales and find it hard to meet most of the production expenses. Such attributes explain why companies should consider all emerging factors before settling on the best pricing method for their respective services and products.
Conclusion
The above discussion has identified three unique pricing strategies that marketers of luxury cars can use to achieve their business aim. However, the nature of such products makes some of the developed approaches more preferable than others. The paper has revealed that value-based pricing is appropriate for such vehicles if manufacturers and marketers are to overcome the challenge of competition while maximizing the level of brand loyalty.
References
Athwal, N., Wells, V. K., Carrigan, M., & Henninger, C. E. (2019). Sustainable luxury marketing: A synthesis and research agenda. International Journal of Management Reviews, 21(4), 405-426.
Loureiro, S. M. C., & Kaufmann, H. R. (2016). Luxury values as drivers for affective commitment: The case of luxury car tribes. Cogent Business & Management, 3(1), 1171192.
Walker, S. Best luxury cars 2020. Auto Express. Web.
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