Chapters 19
1.
Pricing Concepts
a) Discuss in detail the price elasticity of demand for your product/brand/company.
How sensitive are buyers to price changes made to your product/brand/company?
The demand for Coca Cola is elastic. Because there are many alternative brands for
Coca Cola, such as generic brands such as Wegmans Cola, that have more or less the
same taste. When the price of coca cola rises, demand decreases because consumers
will find alternative brands that taste the same but at a lower price, therefore demand
is elastic. Demands for soft drink as an industry whole, demand would not
decrease/increase by a whole lot, because it’s a preferred choice of drink, just like the
demand of milk. However, due to alternative brands providing the same taste at a
lower price, the demand for Coca cola is elastic. Consumers are sensitive to price
and are looking for alternative brands, especially during the recession when
consumers are looking to save money.
b) How do the prices charged by your product/brand/company compare to those
of the competition?
The prices comparatively to that of competitors may differ between a price increase
anywhere between 30 to 70 percent depending on size of drink. Coca Cola has
developed brand loyalty and has reaped advantages of being the first mover in the
soft drink beverage industry. For a 2 liter Coca Cola it costs around $1.70, for
Wegman’s generic brand Cola it only costs 99 cents.
2.
Describe the Pricing Strategy(ies) your product/brand/company use(s) and how
it/ they is/are used?
The pricing strategy used for Coca Cola is a profit oriented pricing strategy. Coca
Cola is concerned with profit maximization, satisfactory profits, and target return on
investment. This is evident in the high price of Coca Cola comparatively to generic
brands like Wegmans Cola. Profit maximization focus on setting prices so that total
revenue is as large as possible relative to total cost. Return on investment consists of
net profit after taxes divided by total assets. Additionally, Coca Cola has a sales
oriented pricing objective, where they focus on market share and sales maximization.
Market share is a company’s product sales as a percentage of total sales for that
industry. Lastly, sales maximization focuses on short-term objective to maximize
sales, ignore profits, competition, and the marketing environment. By combining a
profit and sales oriented approach, Coca Cola is able to flood new products into the
market. increase availability, and maximize profit.