100 Business Strategies: Master pricing to capture markets

Imagine you're on a world tour. As you travel, you find yourself in Morocco, wandering down a city street when you spot a McDonald's. Feeling hungry, you head inside. The menu tempts you with its combo meals at attractive prices—each one cheaper than buying the items individually. The allure of the combo meal persuades you, and you place your order.

This scenario is familiar to McDonald's customers worldwide, thanks to the company's cleverly devised pricing strategy. By offering combo meals at a lower cost than purchasing each item separately, McDonald's employs a technique known as bundle pricing. This approach not only draws in customers but also encourages them to upgrade from smaller orders to more substantial ones, boosting sales and increasing customer satisfaction. The result? Greater revenue for McDonald's and content customers. What more could one ask for?

Examining various brands' pricing strategies reveals some intriguing surprises. The innovative approaches companies develop to carve out their niche in the global market are fascinating. Different markets often require different strategies; what works in one region may not succeed in another. Some companies employ a uniform strategy worldwide, while others adapt to local preferences. Regardless of the method, the aim is always the same: to penetrate the market.

Is the furniture really so cheap?

Could furniture be priced below the cost of production? You might be surprised, but IKEA employs just such a strategy. By pricing certain items below their production cost, IKEA attracts customers with irresistible deals. This tactic, known as loss leader pricing, encourages customers to visit the store, where they are likely to purchase both discounted and higher-margin items, benefiting both the consumer and the retailer.

Are you thirsty? Try this cold drink

Coca-Cola adopts a consistent strategy when entering new markets, whether in India, Russia, or Africa. They initially offer their products at the lowest possible prices to establish a foothold. Once they've gained market share, they gradually increase prices to boost profits. By the time prices rise, Coca-Cola has already secured its place in the market.

Rushing to buy clothes on discount

When you think of a store offering trendy clothes at affordable prices, ZARA springs to mind. Customers return time and again, drawn by ZARA's clever tactics. When a new collection arrives, ZARA discounts its older inventory, encouraging quick purchases and making room for new stock. This markdown strategy effectively drives regular traffic to their stores.

The masters of premium pricing

You can probably guess the brand without needing to hear the name. Apple reigns supreme in the world of premium pricing, teaching everyone the art of it. The prices of their new products can be shocking, yet loyal customers eagerly embrace them, undeterred by the cost. For these customers, Apple's products are a must-have. As demand eventually wanes, Apple reduces prices to expand their market reach and attract more customers.

Pricing: An art and a science

A successful pricing strategy must be as appealing as it is strategic. Delving into the nuances of pricing reveals its complexity and depth, highlighting that it is both an art and a science. No matter the strategy, the objective is constant: to penetrate the market and outpace competitors. Consumers seek value, and by delivering it, businesses can capture the market, drive sales, and maximise profits, ensuring satisfaction for both parties. This is the hallmark of an effective pricing strategy.

Next time you encounter an enticing offer, pause to consider the strategy behind it.

(The author, Dr. Sudheer Babu, is an entrepreneur, writer, poet, and management consultant. He is the founder and managing director of Kochi-based De Valor Management Consultants Private Limited. Email: [email protected])