Question

How can you apply product mix pricing to Walmart when it comes to online shopping. List and explain all the pricing strategies and support your answer with an example

Answer 1

Walmart is a multi national retailer it has so many products and brands. it uses different pricing strategies and it helps them to focus customer and it also helps in compelling the purchasing behaviour through these kind of strategies. by providing discount that means always low prices and everyday low prices.

A business can use a variety of pricing strategies when selling a product or services. The price can be set to maximize profitability for each unit sold or from the market overall. it can be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market.

There are so many pricing strategies like:

• cost plus pricing
• target return pricing
• value based pricing
• competitive pricing

Cost plus pricing

this strategy entails the retailer placing a markup on top of the wholesale cost of the product that they paid for. This is also known as keystone pricing. If you are experiencing slow inventory turnover online, have substantial shipping and handling costs, and own products that are scarce, you may be also to provide a higher markup in price. cost plus pricing ensures that you are implementing an ample profit margin at all times.

For instance, McMaster Carr is a supplier of industrial and commercial facilities worldwide, specializing in next day delivery of maintenance, repair and operations materials and supplies.

Target Return Pricing

This price strategy includes a goal for a return on cost. You can determine a price that yields its target rate of return on investment. The product of desired rate of return and the capital invested provides the required total return, and hence the desired return on investment. A disadvantage of this strategy is that it does not take into account price elasticity and competitor pricing. The manufacturer would need to consider different pricing scenarios and estimate the probable impact on sales volume and profits.

For instance, Grainger is a leading business to business e-commerce site and the largest retailer of maintenance, repair and operations supply on the web. In addition to monitoring competitors on their pricing patterns, Grainger has a specific expectation on target return that they look to obtain from their products, particularly on products in which they can drive larger profits margins.

Value Based Pricing

The pricing strategy entails pricing a product or service to appeal to customers over alternative products or competing prices. It takes into account a very deep understanding of customer value. it establishes prices for products and services largely on perceived value. This strategy works best for products that have highly emotional component or that exist in a controlled environment. The cost of production of products, shipping, tariffs and other expenditures dictate how you price your product and how your competitors price their product.At a very basic level, this strategy depicts the intersection between supply and demand in the marketplace. The price should reflect the value that customers feel the whole product and services package is worth, and hence takes into consideration all products in the marketing mix.

For instance, Nike is a consumer products use case in which the company leverages value based pricing for their product line.Nike is confident that its customers will pay for the value they perceive they are obtaining through the integrity of the product and brand, and not based on competitive influence or target return. hence, they are able to price according to this value perceived by the customer.

Competitive Pricing

This pricing strategy is the practice of setting a price based on what your competition charges for similar goods or services. It results in a narrow gap between cost and profit. When a good or services is offered by many vendors at a relatively similar price, you can charge competitive, For instance,a computer retailer can decide to sell hardware at a loss if they can sell their software or services for a higher margin order to capture the sale and result in a projected positive lifetime customer value.