The Effect of Pricing Strategies on the Company’s Performance

Coach has been one of the leading fashion companies headquartered in Manhattan USA for the past 73 years of operation (Cusumano et al pg. 560). Under different management, the company has had to successfully adapt both national and global business strategies making it competitive and profitable locally and globally mainly as a result having well-established strategies, especially in product promotion and pricing. The company has not only been so profitable but also very reputable and its products valuable. Until recently the company has exhibited declining results as compared to the initial performance when it was under the leadership of Lewis Frankfort 28 years down the line (Kort et al 10).  In efforts to reverse these declining results, the CEO Victor Luis has restructured these various elements important in brand marketability and fashion improvement to regain the public’s initial perception with regards to its products.

Discussion

As a company, the main challenge faced in the pricing of its products is the misperception of the pricing to the related value delivered. Unlike initially when the company’s reputation was built on it pricing technique that won most of its customers, its current performance lacks the understanding the value of the product contributing to the declining number of customers wishing to pay more premiums for products that they had (Kort et al 16).  .  Misalignment of offers and its related prices is another aspect contributing to the menace witnessed in the pricing sector of the products. This is clearly indicated by the action of the company by the removal of offers at its best selling sector which discourages and denies most customer opportunities to access the products during periods of such offers. In addition to that with this inability, some customers who possess varying value requirements are willing to incur extra costs as a result of absence of the offers while others would require less value thus seek the products at a different price (Shao et al, pg. 199).

As economics states that  lower the price the higher the demand for products customer prefer low priced products due to the need for the acquisition of more consumable or non-consumable products (Baumeister et al, pg. 480). However, in most cases, this does not translate itself in most real economies since the low prices of products sometimes create a feeling “to too good to be true or too cheap hence low quality.” This may create a dumper sentiment to the customer before the product sold is made hence making the company in the long run record declining sales. There also exists the post-purchase satisfaction whereby the satisfaction aspect by the consumer greatly determines the subsequent prices to be charged by the company (Shao et al, pg. 176). As much as there exist customers who derive a maximum satisfaction from inexpensive goods in the market offered at discounts, most satisfaction has always been derived from quality products that usually exist in the market. Finally, pricing prestige of the customer is another crucial element whereby due to some products having high prices attached to them, the products are considered to create a sense of exclusivity, motivational and scarce by the customers hence demanded at higher prices. This indicates that price acts as a signal for the quality of the product thus for the most customers price determines their purchasing power in the market.

Availability of a stiff competition available at Coach Inc. price points has affected the performance of the brand especially in the trends of pricing (Baumeister et al, pg. 475).With the existence of a change in the pricing strategy in the markets for the company contrary to the customer expectations and perception the demand for substitutes has emerged implying that customers no longer value the products from Coach Company. Another reason is the high prices charged felt by a customer who relied on the discounts and offers the company failed to honor.   Therefore the different pricing strategies exhibited by its competitors, Kate Spade, and Michael Korir greatly attracted most customers owning a larger part of Coach Market share (Shao et al pg.200).

 Therefore with the establishment of new strategies in the pricing sector the company is definitely going to be in a situation of being able to regain its reputation, improve brand recognition and hence increased sales (Baumeister et al, pg. 488). This is because the entire strategy is majorly based on developing the brand into a lifestyle with the introduction of new products especially in footwear which will make the company unique when compared to its competitors hence increased sales and large customer base. Therefore the company has to majorly invest in the expansion of product provision, especially in the footwear section. In addition to that emphasis should be placed on the provision of a wide range of commodities in the market targeting more groups rather than the women in most occasions ( Baumeister et al, pg. 488).. This should be upheld while the provision of these products at appropriate prices which will help reaches more customers as well as building the company’s reputation.

Captive pricing is a strategy of pricing where a company observes and follows product mix pricing which generally entails offering low prices for core company’s products and placing high mark up of its captive products(Bajwa et al, pg.50).. With this strategy in place, companies aim at creating a large customer base and a large market share through charging low prices on products and recovering this money from the captive products. In the long run, the company ends up making high profits. In form of services, pricing may be a difficult phenomenon since consumers are hard in convincing. The consumer will want to view elements such as portfolios, testimonials and case studies (Kort et al 25).  . This can be done through rate-based pricing, project-based pricing, and tiered pricing. Therefore in services, perceived value pricing is a substitute pricing where prices are determined by the willingness of the customer to buy the product.

Discounts and allowances are reductions to the selling prices charged on goods and services in the market. Discounts are divided into cash discounts which occur when a customer pays a full amount earlier, trade discounts that occur between a seller and non-retail-customers and partial payment discounts that operate as trade discounts but has aims of improving liquidity and cash flows (Bajwa et al pg.58). Allowances, on the other hand, are strategies used by sellers as rewards to buyers for willingly participating in promotional strategies by the seller. They are offered in supermarkets and other areas where promotion strategies by sellers happen hence also referred to as promotional allowances.

Conclusion

Therefore product pricing is an integral element for the performance of any company either locally or internationally. This is because products pricing greatly deals with customer perceptions that can either contribute to the successful performance of the company sales or declined performance due to development of negative attitudes and perceptions with regards to each and every product introduced in the market. Companies should adopt appropriate pricing strategies with adequate information about the customer willingness and also information from its competitors in the market.  As seen from the pricing at Coach Company, various elements in the pricing strategy such as discounts and allowance are very important if appropriately incorporated in by the company.

Work cited

Bajwa, Naeem, Belleh Fontem, and Charles R. Sox. ”Optimal product pricing and lot sizing decisions for multiple products with nonlinear demands.” Journal of Management Analytics 3.1 (2016): 43-58.

Baumeister, Christoph, Anne Scherer, and Florian V. Wangenheim. ”Branding access offers: the importance of product brands, ownership status, and spillover effects to parent brands.” Journal of the Academy of Marketing Science 43.5 (2015): 574-588.

Cusumano, Michael A., Steven J. Kahl, and Fernando F. Suarez. ”Services, industry evolution, and the competitive strategies of product firms.” Strategic management journal 36.4 (2015): 559-575.

Kort, Peter M., Sihem Taboubi, and Georges Zaccour. ”Pricing decisions in marketing channels in the presence of optional contingent products.” Central European Journal of Operations Research (2018): 1-26.

Shao, Adam W., Michael Sherris, and Joelle H. Fong. ”Product pricing and solvency capital requirements for long-term care insurance.” Scandinavian Actuarial Journal 2017.2 (2017): 175-208.