A prestige pricing strategy was used, focusing on the overall value add which reflects the products features, benefits and advantages to satisfy the needs of the five target segment including: children, university students, urban commuters, outdoor enthusiasts and luxury trend followers (Hui and Wong, 2012) The strategy is based around the concept that the permanently high price levels, align with the maximum price the customers are willing to pay. This is recognized as the price ceiling, which focuses on the benefits and features that the backpack can bring to the customer enhancing their lifestyle (Ingenbleek & Van der Lans, 2013)
This premium pricing strategy is demand orientated and emphasizes the high quality and uniqueness of the product to the quality and status conscious consumers, and by doing so it penetrates the market segments (Deans & Watanabe 2005). The high quality features of all the backpacks appeal to all five market segments and the status associated with the backpack due to the advanced features specifically appeal to the urban commuter and the outdoor enthusiast.
However, the premium price strategy was not as effective as expected to particular market segments, particularly university and luxury trend followers. This intern affected the marketing mix and therefore the profit of these segments. The constant overprice of $140 is above the market competitors price (See appendix) and was used to skim the market and maximize profit (Shavandi & Zare, 2013). The backpack was priced at this high rate due to the multiple features that were involved in each specific backpack making it distinctively different, showing the superior characteristics and unique benefits associated (Wathieu & Bertini, 2007). The overall p...
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...cluded that although advertising is important, spending such large amounts on it does not have a similar impact on the amount of sales if it is not effective (Wathieu & Bertini, 2007). This highlights that knowledgeable target segments, such as outdoor enthusiasts, know exactly what features and benefits they need in there backpack, and hence allows the product to sell itself (Chartered Institute of Marketing, 2012). The alternative to the media investment would be to allocate promotional resources and invest the funds in ongoing product development (features, benefits and values).
Overall, the product was set at this high price due to the distinctive benefits, features and values that is possessed. However this overpricing affected all aspects of the marketing mix including product, place and promotion, which in return affected the overall profit of the brand.
In the early 1990’s, outdoor apparel brand, Timberland received an unexpected growth in its consumer base and its sales. The brand’s popular waterproof leather boots, generally used for outdoor activities and moving through rugged terrain, were being worn by inner-city youth as a fashion statement. These new consumers wanted to keep their boots as clean as possible and some even wore the boots in the heat of summer, an incongruous contrast to how the target market used the boots in rough, messy weather conditions. While Timberland enjoyed the unexpected sales, they were faced with a decision. Should they try to further exploit this unintentional market; if so how would Timberland’s outdoorsmen target market respond? In this case, it seemed that these non-target consumers had no affect on the brand’s intended target market. So in response Timberland kept its advertising focused on the brand’s traditional target, while urban consumers continued to buy Timberland products. The brand continued to grow, achieving global sales of over $1 billion by 2007 (Fitch 2009).
During this simulation, we came up with several characteristics that make the particular target market to be unique. These segments vary in size and demographics, price sensitivity, and the backpack features they are looking for.
Under Armor is viewed as a designer company for athletic wear. The company makes higher quality merchandise, which comes with a higher price tag. Under Armor’s line appeals to a wide variety of people, from upper class to lower class consumers. While it is easier for consumers in upper class society to purchase this high-end workout gear, it may not be reasonable to consumers in the lower class or even middle class markets. Companies such as Wal-Mart and Target can make a very similar product for almost half the price. To prevent losing these customers, Under Armor should consider a mor...
As we learned from Chapter 12, price must be carefully determined and match with firm’s product, distribution, and communication strategies. (Hutt & Speh, 2012, p. 300) Therefore, there should be a strong market perspective in pricing. In order to build an effective pricing policy, marketers should focus on the value a customer places on a product or service. One of the most effective ways to do so is differentiating through value creation.
Price increases in the raw material mean that prices needed to be increased, but customers were still willing to pay for a quality product.
The first strategic alternative for Harley-Davidson (HD) to address is that of adjusting pricing. Throughout the years HD has been known for its ability to provide high quality motorcycles to its customers, however this quality comes at a high price. To those customers who are willing and able to pay HD’s higher price for quality the present pricing schedule is acceptable. Unfortunately, to those unable to pay this higher price HD’s motorcycles are unattainable making competitor bike financially more appealing. In order to increase HD’s sales, and consequently in...
In order to beat its competitors, Under Armour Company can engage in market sensitive fresh product invention. New products are more likely to draw curiosity amongst the populations especially if they commensurate well with the prevailing trends (Hill & Jones 2009, p. 308).
Six years after deciding to be an independent public company in late 2000, Coach Inc.’s net sales had grown at a compounded annual rate of 26 percent and the stock price had increased by 1,400 percent due to a strategy keyed to a concept called accessible luxury. Coach crafted the accessible luxury category in women’s handbags and leather accessories by differentiating themselves on price, but matching competitors on styling, quality, and customer service. The accessible luxury strategy mirrors a focus (or market niche) strategy based on low costs. Coach concentrates on a narrow buyer segment and outcompetes rivals by having lower costs than rivals and thus being able to serve niche members at a lower price. Management believed that new products should be based on market research rather than on designers’ instincts. Coach utilized extensive consumer surveys and focus groups to gain insight in the market, and ultimately a competitive advantage over competition. Coach’s $200-$500 handbags appealed to both middle class consumers who now were able to afford a taste of luxury, as well as affluent consumers with the means to spend $2,000 on a handbag on a regular basis.
Kapferer, J., & Bastien, V 2009, The luxury strategy: break the rules of marketing to build luxury brands. London: Kogan Page.
Hennes & Mauritz (H&M) is a Swedish clothing retail company. The company was founded by Erling Pesson in 1947. The first H&M store was opened in Vaesteras, Sweden in 1947. The mission of H&M is to offer fashion and quality at the best price where “quality includes ensuring that products are manufactured in a way that is environmentally and socially sustainable” (H&M, vision & policy, n.d., para. 1). This essay is to highlight the current market analysis, pricing strategy, retail strategy, and competitive advantage analysis of the company.
The high pressure luxury brand industry has evolved over the last few decades from a small and selective to a multibillion dollar arena offering significant potential and growth opportunity for the luxury brands that compete within its realm. With many luxury brands competing for over $225 billion (The Economist, 2009) in revenue each year it is easy to see how strategy plays an important role.
However, when looking to create a luxury brand, one must go beyond what is required of an ordinary brand, to create something of high value and therefore high prices. So instead of just having brand values, it should have brand beliefs, as this will create a stronger emotional connection with its customers. It should aim to go beyond having a logo, but rather a set of distinguishable icons and the brand’s points of sale needs to be somewhere that connects with its customers and becomes something of a pantheon among other retail outlets. Similarly the customer segmentation should have role reversal, so the customers want to buy their products. Luxury brands should instead of actively promoting their advantages over their competitors, never push the customers into buying their products, thereby offering mystique and letting the customers make the value creation. Lastly, a true luxury brand not only offers products but rather a way of life, allowing them to branch out over several product categories, into every aspect of their customer’s
The pricing strategy will start out rather high for this product upon its release in order to draw a more selective crowd such as the upper class members of the urban society. Once the product has succeeded within this market there will be a development of additional variations of the product which will allow for certain models, with less features, to be sold at a lower price point in order to attract the members of society who are less willing to pay the high asking price for the top of the line version of the
-Status symbols: Sophisticated customers who value the distinctive, exclusive collection seem to value the corporate-branded version of luxury. –Philip Martiz, chairman of the board
After a 4 P analysis of the company one found that it found itself in a luxury market where product quality and constant innovation are key points for the success. That is why the production process and its design can take even months. Product line is extensive however it is only conformed of high priced products. Price in this case is a guarantee of the quality present in the product. Moreover, high pricing represent an element of differentiation that the customer appreciates. However this is not a setback, LVMH has managed to have world wide presence and success. To accomplish it its selective retailing division is of high importance. Nevertheless, promotion posses the major challenge since its through this that the image of the product its transmitted that is why the company poses a major part of its budget in this section. It is Important to note that the percentage allocated is higher than those of most competitors.