Pricing Strategies of Standard Machine Corp.

Standard Machine Corp.

Standard Machine Corp. uses a cost-based approach in pricing. The approach is basically where the price of production of a product or service is added a particular percentage of money is added on the cost to make the profit. Some of the most used strategies in the approach include cost-plus pricing and pricing at a premium. When Scott goes to Tony to inquire if they could reduce the deal with Occidental Aerospace from $429000 to $407000, Tony holds on to the original price, explaining that the company sells their products at high prices due to the quality and reliability. He then explains that the company attained its success through innovation and investing a long time in the developments of its software. In Scott’s recommendation of how the product could reach at $407000, he suggests how either the quality of the product should be reduced, or how the after-sale services could be cut down. Therefore, Standard Machine Corp. sets its prices based on the cost of production.

Pricing Strategies and Approaches

No one pricing strategy can account for success in business (Nagle & Muller, 2017). Consumers cannot buy overpriced products, while on the other hand, a company cannot survive by making loses. The various pricing strategies and approaches depend on a company’s status. Some strategies work for established companies, while other work for new companies or while introducing new products. In this case, the company has been around for a long time and has established a good relationship with its clients (Nagle & Muller, 2017). As Tony says, the company has been in business for a very long time, using this particular pricing strategy, which has proved to work. He also tells Scott that the company cannot change its pricing approach every time a client threatens them with the competitors. However, the company should also incorporate other pricing strategies to ensure they retain royal clients like Occidental Aerospace.

Scott’s Sales Pitch and Effective Communication

Scott’s sales pitch reveals that he understands the client’s needs all along the conversation. He reminds Joanne, the representative of client, some of their needs like after sale services and training. He also insists of the quality of the products they sell, compared to the competitor. He even goes ahead and gives a story of several instances in the past, when Occidental Aerospace had problems that Standard Machine Corp. solved in a short time, which he doubted if their competitor could achieve. He seems to understand the competitor’s products and knows some of their flaws, which even Joanne agrees with. During the whole conversation, he calmly advocates for their product using facts about the advantages of their product, which makes it more expensive than the competitors (Smith, et al., 2010).

Effective Communication and Conclusion

Scott’s communication is effective all along the conversation. He does not interrupt Joanne or Tony, but rather takes time to listen, and responds objectively at all times. At several instances, he empathizes with Joanne but keeps on reminding her of the reasons they have higher prices compared to the competitors. However, Joanne’s seems to have decided to cut cost, and when she gives the deadline for lowering the bid, he understands it’s the final decision and could not change their mind. He also communicates the same to the sales manager immediately.

Recommendation by Tony Della Pena

If I were Tony Della Pena, I would recommend Scott’s suggestions to my superiors and advocate for their implementation. This is because all customers are essential in the growth of a company. In this case, Occidental Aerospace had been good customers for a long time, meaning they had contributed to his company’s success. Considering that Occidental Aerospace was expanding and would need to make big purchases shortly, it would be in the company’s interest to maintain such a client.

References

Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably. Routledge.

Smith, W. K., Binns, A., & Tushman, M. L. (2010). Complex business models: Managing        strategic paradoxes simultaneously. Long range planning, 43(2-3), 448-461.