Page 3: Price
Lots of factors affect the end price of a product, for example, the costs of production or the business need to maximise profits or sales. A product's price also needs to provide value for money in the market and attract consumers to buy.
There are several pricing strategies that a business can use:
- cost based pricing this can either simply cover costs or include an element of profit. It focuses on the product and does not take account of consumers
- penetration price an initial low price to ensure that there is a high volume of purchases and market share is quickly won. This strategy encourages consumers to develop a habit of buying
- price skimming an initial high price for a unique product encouraging those who want to be 'first to buy' to pay a premium price. This strategy helps a business to gain maximum revenue before a competitor” product reaches the market.
On re-launch the price for NIVEA VISAGE Young was slightly higher than previously. This reflected its new formulations, packaging and extended product range. However, the company also had to take into account that the target market was both teenage girls and mums buying the product for their daughters. This meant that the price had to offer value for money or it would be out of reach of its target market.
As NIVEA VISAGE Young is one of the leading skin care ranges meeting the beautifying needs of this market segment, it is effectively the price leader. This means that it sets the price level that competitors will follow or undercut. NIVEA needs to regularly review prices should a competitor enter the market at the 'market growth' point of the product life cycle to ensure that its pricing remains competitive.
The pricing strategy for NIVEA is not the same as that of the retailers. It sells products to retailers at one price. However, retailers have the freedom to use other strategies for salespromotion. These take account of the competitive nature of the high street. They may use:
- loss leader: the retailer sells for less than it cost to attract large volume of sales, for example by supermarkets
- discounting alongside other special offers, such as 'Buy one, get one free' (BOGOF) or 'two for one'.
NIVEA VISAGE Young”s pricing strategy now generates around 7% of NIVEA VISAGE sales.