Pricing Strategies - Dell

Topics: Pricing, Variable cost, Competition Pages: 8 (2108 words) Published: May 23, 2008
1. Introduction

Pricing strategies usually change as the product passes through its life cycle, because there is constrains on the company’s freedom to price a product at different stage. The purpose of this report is to determine and elaborate the elements in pricing strategies of Dell’s notebook.

2. Key Objectives
Price is the amount of money changed for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service (Kotler et al., 2003, p.332). Historically, prices were determined through bargaining or negotiations between buyers and sellers. Different prices were set based on the buyer needs and bargaining skill. The establishment of one price for every customer is relatively new phenomenon that came about with the rise of retailers but price still remains a major factor in affecting consumer buying decisions. In addition, it is the most flexible of those components. The ability of price to affect consumer decision and its flexibility makes pricing strategies important in meeting Dell’s objectives in a competitive environment. The main objective of Dell is to produce the low price and profitable notebook for the customer. For Dell Company, all the prices that they sell are posed to the internet and they usually based on the e-commerce market. The main reason for successful pricing strategy is having a reasonably accurate idea of supply and demand. Too high a price and demand fall as less buyers purchase the product. Too low a price can increase volume of sales but reduce margins profit. So, Dell has aimed for the e-commerce which is the multiple markets operates at different times of day and may interact or affect each others. Dell Company had set different types of price based on the home user, small business user and medium or large business user. The pricing structure changes as the products move through their life cycle. The company also always changing costs to make sure that they are still able to survive in the competitive environment. From there we can see that Dell company success to do that especially they can provide any prices and products that the consumers’ wants although promote and sell their product through the Internet.

3. Desired Positioning/Implication


Product positioning is the way the product is defines by the important attributes. In other words, it is how the consumer recognizes the product. Some of the positioning strategies are on product attributes, need that consumer feel or the benefits, usage occasion, class of users, against competitor, away from competitor and different product class (Kotler et al., 2003, p.233). The strategies that Dell is currently using are positioning against competitor. They introduce attracting price for their product, which they positioned each other as the product were similar ( to the product produced by other producer like Sony and IBM. Dell also positioned itself as the lowest price consumer notebook maker.

b).Competitive Advantages

The competitive advantage that allows Dell to successfully position itself is because of certain factors. The factors are Dell provide e-commerce or online order/payment services while its competitor were trapped with their traditional off-line channel partners because most of the resources comes from there ( Dell also provides a unique direct-model where they customize product base on the customers need. This enable Dell to produce at lower cost as its inventory level are low as they built after order (ibid). Furthermore, Dell also provides excellent service to its customer by provide call-in services to maximize customer satisfaction.

4. Competitive Situation/Effect on price

External factor affecting a company’s decisions is competitors’ prices and their possible reactions to the company’s own pricing moves. A consumer considering...
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