Business Model Pricing Strategy

1385 words | 5 page(s)

Building a good business has a lot to do with developing a good business model. To the greater extent, a good business model will guide the entrepreneur and the management in structuring the activities of the business and setting prices for products and services. SmartTek is an upcoming business that will specialize in the manufacturing and distribution of smartphone and tablets. The company’s main goal is to meet growing need of quality lightweight communication gadgets. The company’s primary business model is to use the internet in meeting its daily operations through the business-to-business and business-to-consumer models. Online advertising will be an important part of the company’s overall business model.

To increase its profit margins and gain a bigger market share in the market, the company will apply numerous pricing strategies such as price skimming, penetration pricing, and competitive pricing. The electronics industry is very competitive and price skimming and penetration pricing strategies will greatly boost the company’s success. The internet business model will help the company in maximizing its profits by allowing customers to interact closely with the management and the staff.

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SmartTek Industries is an upcoming Tablet and Smartphone Manufacturer employing Android and Windows operating system. Its major aim is to provide gadgets with new functionalities that meet the need of its target audience and professionals who admire lightweight mobile tech. The technology will alter the way people use technology without sacrificing power and its usability.

SmartTek will employ internet business strategy in its operations. Being a technology related business, the use of internet business model will facilitate SmartTek success in all its business operations. Internet model can be either business-to-consumer, business-to- business and consumer-to consumer (Muehlhausen, 2017). The use of these strategies will highly create business success through competitive advantage.

Through business-to-consumer and business-to- business models SmartTek will be able to sell its Tablets & Smartphones to its target audience. Additionally, the company will create awareness and educate its target group on uniqueness of its Tablets & Smartphones. On the other hand, consumer-to consumer internet approach will enable customers to sell company’s products to other customers through various platforms. Business-to-consumer and business-to- business models will enable the SmartTek to deliver its goods and services through a website (Muehlhausen, 2017). The company will employ merchant models such as to operate storefronts on the internet and offer its customers a shopping experience like any other. To add its competitive advantage, brokerage models like eBay will also be appropriate for SmartTek, to create a market platform where buyers and sellers interact.

To increase SmartTek market share, community internet model will also be appropriate. Community model is more of a consumer-to-consumer model. To achieve success by use of this model, the company will avail its products to various websites like Angie’s List, and Social networks such Facebook and Twitter and other user formulated content such as Wikipedia and eHow (Cohan & More, 2017). Availability of the company’s information and services in these internet platforms will enable customers to review its products and services and purchase them if their needs and preferences are met. Additionally, the community-based model offers a good platform through which consumers interact and share ideas, information and experiences.

SmartTek will also apply advertising model and manufacturer direct model to reach its customers. Google offers good advertising model. SmartTek will use paid text adverts, search placement and user-tracking to facilitate advertising to its consumers. SmartTek will also develop an online product catalogue (Cohan & More, 2017). Through this catalogue, the customer’s access the SmartTek website to buy the Tablet & Smartphone enabling it to operate with few sale people.

Other business models will not yield much success as compared to internet model. The major reason behind this is the fact that such models as Brick and Mortar and Franchise are expensive and time-consuming (Cohan & More, 2017). Additionally, being a small business at its initiation stage, developing a distribution chain is very expensive.

For SmartTek to make more sale and increase its profitability margin of its new and unique Tablets & Smartphones, it must employ various pricing strategies. This will help the company set prices that will attract customers due to its affordability (Prasad, 2010). Being an introduction of new and unique technological product, price skimming will be most appropriate for SmartTek. Pricing skimming strategy will involve setting higher prices for the Tablets & Smartphones after launching of these products to recover production and marketing costs (Oxenfeldt, 2011). The additional revenue received from the sales will be reinvested into company’s research and development (Prasad, 2010). This strategy enables SmartTek to succeed in its innovations since it will always meet the need of the buy-first customers who always attracted to the emerging trends.

Electronic companies have been in existence for many years, for this reason, penetration pricing strategy can also be excellent for SmartTek. Creating quality products and offering it at lower prices will attract a large pool of customers at the initial stages. Continued quality products and customer services will enable SmartTek to retain its customers and increase its market share swiftly (Oxenfeldt, 2011). Competition-based pricing strategy is also appropriate for the company’s success.

Competitive pricing involves setting prices of the Smartphones and Tablets taking into consideration the prices of its competitors. The major reason behind this is the fact that there are other companies such as Apple within the industry manufacturing similar products. This means that SmartTek will set its prices based on what other organizations are selling their products. Taking into consideration the major goal of the company, it will price its goods and services at lower or higher prices (Oxenfeldt, 2011). By employing competitive-based pricing has its advantages and disadvantages. The first advantage is that it circumvents price competition that can destroy the company. On the other hand, it makes price useless in the creation of competitive advantage to the company since the price will not attract customer’s interest. Instead, the company must use other technique to attract and maintain customers.

Other pricing strategies are not likely to yield success since SmartTek is a new technology company that requires effective strategies to attract and retain its market share in the existing highly competitive technology industry (Oxenfeldt, 2011). Additionally, emphasizing on price can lead the company to lose direction on the developing customer needs and preferences. For instance, due to the advancement of technology, the introduction of unique tablets and smartphones can easily be copied by other organizations and offer it at lower prices (Oxenfeldt, 2011). For this reason, SmartTek should not only focus on pricing strategy but also other factors that will increase its competitive advantage such as product differentiation.

Through internet business model and skimming and market penetration pricing strategies SmartTek will succeed in its business operations. The reason behind this is the fact that, the use of these strategies creates a competitive advantage for the company (Prasad, 2010). Additionally, use of the above strategies increases the company’s market share significantly. The technology business is an interesting but a challenging business venture since it requires an elevated level of innovation and creativity (Oxenfeldt, 2011). To remain relevant in this industry, companies must employ innovative marketing strategies and embrace emerging technology. This can only be achieved through research and development into the needs and preferences of the customers.

Internet business model creates a platform that customers and the company’s agent can interact. This enables the business to get first-hand information regarding its products and understand what they should do to satisfy the needs of its customers. Customers can share their ideas and experiences of using SmartTek products and services. The pricing strategies, on the other hand, create a good initial rapport between SmartTek and their customers (Oxenfeldt, 2011). Provision of quality goods and services at a fair price attracts and maintain customers which in turn increases SmartTek sales and profitability and its business success. Selling products and service at a lower price but at a larger volume, offers an opportunity for the company to retain its profits margins and more so its market share. Some consumers purchase goods and services from organizations and stores that sell its products at affordable prices (Cohan & More, 2017). In this regard, SmartTek being an emerging technological company, it will face stiff competition from such companies as Apple. To build a large market share in the industry, the company must offer its products at lower prices as compared to its competitors.

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