A pricing strategy is a market plan that a company sets to determine how to sell its products. When setting a pricing strategy, a company should be able to consider setting a price that is higher than the cost of production. The price that an enterprise sets has to be competitive but still enable the company to make enough marginal profit (Reynolds, Cuthbert son & Bell, 2004). The United Breweries Company is an international India company that specializes in aviation, beverages, and chemicals. Company that deals with production, storage, distribution and selling of beverage substances such as wines and spirits under the Kingfisher brand other alcoholic substances. Below is a description of how the United Breweries company sets its price strategy as well as retail process.
In setting the price strategy, the United Breweries Company has to determine its target group in the market as well as combining other marketing strategies known as four Ps. The four Ps involve knowing the product, the place, the price, and the promotion. For example, the product of the United Breweries Company wine and spirit the company has to ensure that it sells the same product at different prices in different markets. From the results of the previous year, there has been general annual income of the United Breweries Company which has been brought due to its efficiency in pricing strategy and retailing strategy.
The United Breweries company uses the following pricing strategies; penetration pricing, skimming pricing, competing pricing, product line pricing, psychological pricing, premium pricing and optional pricing. We will discuss how the United Breweries Company uses each of the above pricing strategies to maximize its annual profit. The United Breweries Company uses the penetration pricing strategy to increase its sales and market share. For example, the company usually sets a low price of some common wines such as Kingfisher in order to penetrate the market. This method has made the company to increase its subscribers globally (Unitedbreweries.com, 2007).
When the beverage products of the company become popular in the targeted market, the United Breweries Company uses the skimming pricing strategy. In this strategy the company raises the price of the product they are selling then slowly reduces the price in order to attract a larger market and attain a maximum marginal profit within the shortest duration as possible. The other pricing strategy used by the United Breweries company is the competition pricing. This company normally sets a price that is matching to the price of the competitors. For example, the company may sell a bottle of Kingfisher blue at USD 2.00 same price as that of the Guinness. Guinness is a bear from a competing company.
The success of the company has increased because of the company being able to use proper marketing pricing strategy to understand the desire of the consumer. This has been achieved by the company using product line pricing strategy. The company uses different branding techniques to differentiate the same product by changing the appearance and taste of the product. The differentiated yet same product are sold at different price levels. For example, the United Breweries Company has differentiated the Kingfisher brands into various categories such as Kingfisher Premium, Kingfisher strong fresh and other. All the products are sold at different prices indifference markets. The aim of differentiating the products is to increase the annual total revenue of the company (Unitedbreweries.com, 2007).
The United Breweries Company also uses the cost base pricing strategy techniques to come up with their final pricing. The company evaluates the cost of production, distribution, and other expenses involved in the production. Then it decides on the markup which it will decide to sell the final product. This strategy has enabled the United Breweries Company to have a higher marginal revenue than the marginal cost of production.
A retail strategy involves identification of the target market and using various methods of distribution to ensure that the products have reached the consumer. The United Breweries Company uses various distribution retail method to distribute its product. The common channel of retail distribution used by the United Breweries Company is moving the product from the producer then selling them to a wholesaler or an international distribution agent in large bulk. The whole seller can then sell the product to a retailer or sell direct to the consumer. The retailer sells the product to the consumer.
The retail strategy used by the United Breweries Company involve identifying a larger market with less competition for selling the company’s product. The company uses retail branding stores to build customer loyalty. The important of using retail branding stores is that they help in changing the labels on different brands of the product to meet the targeted consumer. For example, the United Breweries Company has a different retail branding store for Kingfisher brands and Heineken (Reynolds, Cuthbert son & Bell, 2004).
One of the successful retail strategy used by the United Breweries Company is using its retailers in different global part to identify potential market for the company’s products. This retail strategy assists the company determines the amount of price discounts and incentive it should give. The organization has different retailer all over the globe who pass information on the preferred methods of packaging and branding of the products which will increase the revenue. For example due high pricing and reduction of the cost of lower bottle of Heineken, the company profit increased by 20% in 2007.
In conclusion, the feedback information obtained from the retail strategy assist the company to increase its product quality and services. The continuous increase of profits in the united breweries company has been channeled by the ability of the company to able to use different retail and price strategy techniques. These strategies have made the United breweries company to gain competitive advantage.
- Pradhan, S., & Pradhan, S. (2009). Retailing management: Text and cases. New Delhi, India: Tata Mcgraw-Hill Education Pvt. Ltd.
- Reynolds, J., Cuthbertson, C., & Bell, R. (2004). Retail strategy. Amsterdam: Elsevier Butterworth-Heinemann.
- Unitedbreweries.com,. (2007). United Breweries Limited – Kingfisherworld. Retrieved 10 February 2015, from http://unitedbreweries.com.