Premium Pricing Strategy: Tesla Vs Gucci
A company should decide on the pricing objectives, determine the total production cost, and analyzes the affecting factors (competitor, consumer behavior, law & regulation, etc) before setting the pricing strategy and the price of its product (Principles of Marketing, 2015).
According to Principles of Marketing (2015), The pricing objectives of a company might be different from each other. Some companies might want to earn more ROI, while others are focusing on maximizing profits. Some companies that struggling financially, need to earn quick cash to pay debts or their operational cost by cutting off the prices temporarily to maximize sales. Whereas some companies that need to survive the market competition might focusing on maximizing the market share or maintain the status quo.
Some pricing strategies might be elastic (price-sensitive) such as competitive pricing strategy done by mobile phone manufacturers or airplanes ticket agents or inelastic (price-insensitive) such as premium and value-based pricing strategy that has been done by the luxury brands manufacturers. (Principles of Marketing, 2015)
In this discussion, let’s talk about the pricing strategy done by Tesla and Gucci.
How have the companies been successful in charging high prices to the brand’s consumers, despite the low costs of manufacturing?
Tesla
Tesla is one of the biggest electric car manufacturers that has successfully offered premium pricing for its consumers despite its competitors such as Nissan and Toyota offer a much lower price. According to Prime Custom Thesis (2021) article, Tesla sets its target market for consumers who favor luxurious eco-friendly electric cars. In 2021, Tesla earned more than $40 billion albeit the operating cost was just $5 billion (Stock Dividend Screener, 2021). To ensure its success in acquiring market share in the luxurious electric vehicles, Tesla gives tremendous efforts to innovate and focusing its operational cost mostly on its Research and Development. They make sure that the company can provide fancy cutting-edge technology to its product to keep their customers’ loyalty and giving prestige to its customers. Moreover, Tesla also implements some strategies such as no negotiation policy (no discount policy), control the price flexibility, analysis, and control implemented by finance to generate accountable transparent pricing decisions (Pricing Insight 2021)
Gucci
Based on the article written by Florine Eppe Beauloye (2021), Gucci has earned the first rank of the top 15 popular luxury brands in 2021 for four consecutive years. Florine stated that Gucci prevails as the best performer in the luxurious brand by leveraging its storytelling, and constantly innovate and experiment their online presence. Some remarkable online innovations are digital gifting with split payments, Try-on features on Snapchat by AR, and develop their mobile app to increase the convenience for its customers. To gain more market share, Gucci adopts genderless fashion to market their product regardless the gender, and sustainable supply chain to earn the younger generation who favor the eco-friendliness and sustainability concept. They also provide eco-packaging to ensure that their luxury product has environmental value.
How is customer information used as a part of the pricing strategy?
As we learned in this unit, some factors influence the pricing strategy such as customers, competitors, economy, government laws, and regulations. Now let’s discuss the customer factor. Companies need to learn about their customers by analyzing their customers’ information. According to the Principle of Marketing (2015), the companies should know how the buyers perceive the product’s value, the estimated number of customers, and whether the customers are sensitive to the price or not. By analyzing and evaluating their customers’ information the company that offers premium pricing strategies such as Gucci and Tesla can adjust their marketing strategy to satisfy their customers’ needs. The customers will keep purchasing their product regardless of the prices because the customers believe that the values given by the companies are worth the price.
Conclusion
In conclusion, to determine the best pricing strategy the companies are obliged to learn about their consumers’ behavior, determine the pricing objectives, learn about the competitors, and getting familiar with the economic situation and regulations. The customers’ information can be a powerful tool to leverage their market share.
The companies that offer premium pricing products such as Tesla and Gucci need to pay attention to their product’s values and brand strength. What kind of values that the brands bring to their customers, whether it’s prestige, eco-friendly, cutting-edge technology, or pride.
References
Principles of marketing. (2015). University of Minnesota Libraries
Pricing Insight. (2021). How to Make Tesla’s Pricing Strategy Work For Your Business. https://pricinginsight.com/resources/tesla-pricing-strategy/
Tesla Motors: Pricing, distribution, and integrated communication strategies — Implementation plan. (2021). Prime Custom Thesis. https://primethesis.com/essays/business/tesla-motors-inc.html
Top 15 most popular luxury brands online in 2021. (2021, August 10). Luxe Digital. https://luxe.digital/business/digital-luxury-ranking/most-popular-luxury-brands/
Tesla operating expenses and cost breakdown analysis. (2021, February 9). Stock Dividends Screener. https://stockdividendscreener.com/auto-manufacturers/tesla-quarterly-operating-expenses/
Note:
This article is written based on University of The People Marketing Management (BUS 5112) written assignment by Fristy Tania in October 2021
