The role of price
The three examples mentioned above show that customers frequently have a difficult time assigning values to products. Moreover, different customers perceive differing amounts of value in a product or service (Marriott, 1995). It is important to note that high tax rates have a great impact on breweries and their price level forcing companies to increase price level. “The current proposal exempts breweries that produce fewer than 200,000 barrels per year from the new tax. That would ease the pinch for most of the state’s homegrown brewers.
But its largest, Widmer Brothers Brewing in Portland, is above the exemption limit and Deschutes Brewery in Bend is close” (Uncap Beer Tax 2006, A1). The role of price as an indicator of product quality for buyers is essential for Widmer Brothers Brewing. The company reduces total demand and sales by suggesting a lower quality level, or a tendency toward deterioration, for the product. The company tries to establish its competitive position through low prices in relationship to specific competitive products or against specific companies that are competitors (Milici, 2000).
The competitive pricing relationship established by Widmer Brothers Brewing can be defined as a strategic management choice. Similar to Budweiser, Widmer Brothers Brewing follows price-sensitive strategy for online and store sales. In order to attract customer and create a core of loyal supporters, Widmer Brothers Brewing introduces lower prices for the Internet buyers. This strategy shows a close link between pricing and promotional activity of the company (Kohli, Labahn 1997).
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On one hand, advertising requires costs that have to be recovered through prices. However, it is important not to overlook the possibility that production and distribution costs for individual items may be reduced due to the large and stable sales volumes made possible by mass advertising. Thus, the unit costs of these large production volumes may not be higher than the unit costs of the smaller volumes that would be sold in the absence of advertising (Fill 1999).
Recommendations Widmer Brothers Brewing may be established to more favorably price products in order to attract the lower-price buyers: this is sometimes called economy pricing. For specific brands, like Blonde Ale or Muscat Love Fruit Beer, the pricing relationship strategy may be to price higher than competitors for similar products. Higher pricing is sometimes referred to as quality pricing. This strategy is intended to imply that the higher price exists for a good reason.
In competitive position pricing, Widmer Brothers Brewing will determine its major competitors and price its products according to the prices of these companies. The company will then try to maintain the planned strategic pricing relationship as a basic pricing position for most or all of the products in its line. If Widmer Brothers Brewing believes that it offers superior quality and product uniqueness that provides a favorable cost-to-benefit ratio relative to the competitive companies, then it may set a standard higher price than its competitors.
This will probably be a price that is always higher than the competition by a set percentage. Other companies using the competitive positioning pricing strategy may choose to be recognized as the economy choice. They will offer their products at a lower price and try to give value for the quality that they offer, even though it may be lower than some competitors. Not everyone shops for expensive products. The key to using the competitive positioning pricing strategy is in being sure target audience agrees with the position the company have chosen (Crawford 2003).
If Widmer Brothers Brewing wishes to be recognized as the high-price quality line, the products and brands must be easily recognized by customers. The use of competitive positioning in relationship to the company and its competition will have an impact on the company image. Because the market has moved on, there can be a gap between the skills required to compete in the market and those possessed by the company: “the consumer expends all of their income (budget) and selects specific amounts of the two products.
Product prices and income are predetermined and, consequently only the quantities of the two products are varied to maximize utility” (McDonald, Christopher 2003). Examining what customers appreciate and what they want to receive will help Widmer Brothers Brewing to attract wide target audience and establish successful price strategy. Conclusion The pricing strategy used by Widmer Brothers Brewing allows the company to sustain competitive positioning and deliver high quality products and low price to its potential customers.
Thus, by attracting customers to online marketing, the retailer is also in a position to sell them their regular purchase requirements at lower prices. Widmer Brothers Brewing is aimed to achieve competitive advantage creating value for their customers, select markets where they can excel and present a moving target to their competitors by continually improving their position. The current pricing strategy helps Widmer Brothers Brewing to ensure long-term success based on brand loyalty, middle-income market segment and price reductions.
This strategy allows Widmer Brothers Brewing to continue to earn profits during times of heavy competition. The low costs per gallon also serve as a barrier to entry because few new entrants will be able to match the Widmer Brothers Brewing cost advantage.
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