Question

Give two examples of brands where manufacturing costs are well below the selling price. With that in mind provide answers to the below questions;

1. How have the have companies been successful in charging high prices to the brand’s consumers, despite the low costs of manufacturing?

2. How is customer information used as a part of the pricing strategy?

please include APA style references.

Answer 1

There are numerous brands that are using value-based pricing strategy to sell their products at higher prices irrespective of their low manufacturing costs. Companies like Rolex, Apple Inc., Sephora, and Bentley are certain examples of low manufacturing costs and high selling prices. These companies are deciding selling prices on the basis of value-based pricing strategy. Value pricing is customer focused pricing. The belief of customer regarding the product, quality of product, unique and innovative features led the companies to adopt value-based pricing. Companies adopting value-based pricing are most likely to provide high end feature in their products. For example, Apple Inc. provided high end privacy, security feature and exceptional camera quality in iPhones that makes iPhones expensive. Similarly, Bentley care about its customers. Bentley provide exceptional after sales services to its customers making it highly expensive then Volkswagen (Parent company).

Customer information is used to segment the market and decide the target group. For example, the above stated companies segmented the market on the basis of financial status in the society. These companies manufacture only luxury product that can be afforded by people belonging to elite class. Customer information is used in customer value-based pricing strategy. Here, the perception of customer's need for a product and perception towards the product is identified and then the prices of the product are decided irrespective of the manufacturing cost of that product.