Tuesday, May 5, 2020
Marketing Principles Pricing Strategy and Execution
Question: Discuss about the Marketing Principles Pricing Strategy and Execution. Answer: Introduction: McDonald is an international fast food restaurant chain which produces different food products that everyone can afford to purchase and BigMac is one of the hamburgers that serves in the international market and is one of the McDonald signature products. Pricing elasticity of demand shows the variation in the quantity needed comparative to a change in price for products or different service. In the case of McDonald, the target consumers are young generation and persons who belonging to the working section (Pride, 2011). The demand of McDonald products will decrease to some extent as income rises, because persons have a habit to spend more money for healthy food as compared to fast food (Pride, 2011).. On the other side when when income decreases, people like to spend more frequently on McDonald meals as well. The demand of elasticity of McDonald products like BigMac is quite elastic. The elasticity of demand rises when the demand of the product is affected by raising the price of the products (Macdonald, 2016). McDonald consumers are extremely reactive to a change in the price of its products and hence the McDonald products are a luxury for the low-income consumers on the other hand it is inelastic for for higher-income consumers McDonald has been adopted cost leadership marketing strategy by serving fast food meals like BigMac at low prices (Macdonald, 2016). McDonald price strategy is localized rather than globalized as it has different pricing of their meals for different countries (Macdonald, 2016). McDonald sets their price as per the product life cycle for example, as shown in diagram- The US Market was on the declining level of the product life cycle as the price of a Big Mac meal was lower as compared to the Japan (Johansson et al., 2011). The Japan market was growing to maturity, so at high prices Big Mac was gainful. As the price of BigMac is different from country to country due to the high or low cost of living and another factor like geographical, government regulation, exchange rate economic climate also affect the pricing strategy of BigMac and other McDonald products. McDonald pricing strategy take in price bundling and involve with psychological pricing. In price bundling tactics, the company serves meals with other meal bundles for a discount or cheap rate. In psychological pricing, the company uses prices that attract the consumers and to be more affordable, like $-.98 as an alternative of rounding it off to the near dollar. (Davidson and Simonetto, 2005). McDonald applied special tactics of psychological pricing method than that build the image of the company brand without making significant changes to the product. Many McDonald consumers will generally demand a Bigmac meal, and offering more than one product as a deal and reduce in the price of meal, that inspires the consumers to purchase more product. McDonald BigMac increased by applying the special tactics of pricing bundling and psychological pricing (Johansson et al., 2011). No doubt that McDonald is truly globalized and one of the best foods chain, and use their strategies wisely. McDonald has well understood its image in the market and if the company manages their services and price properly, the company will be best Fast food chain for another coming year. References Davidson, A. and Simonetto, M. (2005). Pricing strategy and execution: an overlooked way to increase revenues and profits.Strategy Leadership, 33(6), pp.25-33. Johansson, M., Hallberg, N., Hinterhuber, A., Zbaracki, M. and Liozu, S. (2011). Pricing strategies and pricing capabilities.Journal of Revenue and Pricing Management, 11(1), pp.4-11. Macdonald, D. (2016). Donald Macdonald.BMJ, p.i2305. Pride, W. (2011).Marketing principles. 1st ed. South Melbourne, Vic.: Cengage Learning.