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Assignment 3: Pricing
Honda uses different type of pricing for different segments all over the world.
It uses the following pricing strategies:
Market Skimming Market Penetration Premium Pricing
Premium Pricing: Honda cars usually price their products at a higher level than their
competitors. It believes that the customers should be provided the comfort level they deserve
and launch their cars for people of upper middle class. On the same time, Honda is believed
to be a ethical company and hence provide a genuine product and hence price higher. They
started using this strategy in US and then used in Europe as well.
Market Skimming:Honda always prices their products more than their competitors so that
whenever the need arises they can decrease their prices or can offer an discount to lure
people. This has worked well for them all over the world. This strategy is only used by
Honda when they establish in a market.
Market Penetration: This strategy has been usually used by Hondawhen they enter a new
market. Honda two wheelers is using this strategy in India after their alliance broke with
Hero. Now they are launching many two wheelers at a very low price to penetrate into the
Indian market again and to regain the leadership they had earlier in alliance with Hero.
Example of Skimming Pricing Strategy used by Hondas Luxury Brand (Acura):
Acura's management realized that their new products had already obtained a strong foothold
by the end of 1986, and a slight increase in price would not hurt the demand. Another
argument was that higher price tags would contribute to the image of luxury. It was further
learned that low prices compared to German prices undermined the status the customers were
seeking. Therefore, Acura started in 1987 with a 2.3% price increase on its cars. By 1988,
Integra had been selling for $10,915 (+3.5%), and the flagship Legend carried the price of
$23,675 (+2.5%). However, sales data indicate that this price increase did not push the sales
down. In fact, through the entire period of the late 1980's, prices kept rising, bringing new
revenues to Acura. At the end of 1989, after some modifications, Legend carried the nominal
price of $30,840 but, nevertheless, was still able to keep up with the pace of sales. By
undertaking the described measures, Acura management gradually began to move from a
penetrating pricing strategy to a market share strategy. By 1988, Acura already had a 7.2%
share of the regular luxury car segment (Wall Street Journal 1989). The end of the penetrating
strategy characterized Honda's start. With the introduction of the new model in 1991, Acura
moved away from a market share pricing strategy to a skimming pricing strategy. It is
positioned as the "ultimate" luxury car, and uses TV ads depicting ultra luxury to back up its
claim. Acura becomes the number one imported luxury car in the U.S. surpassing M-B.
Rohit Oberoi
MBA Marketing and Finance
Global Marketing Management
8/13/2019 gmm_assign3
2/2
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