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Critically Evaluating The Unilever Pricing Strategy

Question

Task: Produce a report that evaluates the appropriateness, advantages and disadvantages of an organisation adopting pricing methods of either a ‘mark-up pricing’ or ‘price bundling’. The report should include:

  • An introduction to your report, the company and the products and services they provide. (Approximately 250 words)
  • Main body- Here is where you present the advantages and disadvantages of each pricing method. Please ensure that you consider the appropriateness of each method to the company (Approximately 1,000 words)
  • Conclusion- Please give a summary of the report and key points (Approximately 250 words)
  • Reference list – Please ensure that you show evidence of research using relevant and appropriate sources

Answer

Introduction
In this report, we will study about the UK’s one of the leading company “Unilever” alonf with its effective Unilever pricing strategy in a detailed manner. Unilever was founded in the year 1929 and had its co-headquarters in England, London, Netherlands and even in Rotterdam. The company has achieved success as approx. 2.5 billion people use this company’s products so that they can feel and look good. They make products which include energy drinks, ice cream, food and even beverages, cleaning and beauty products and even care products for personal use. Unilever is considered as one of the largest soap producers in the entire world, and it is one of the oldest companies which are multinational, the company’s products are made available in more than 190 countries (Unilever UK & Ireland., 2020). The company has over four hundred brands. The company is mainly categorized in 4 divisions those are refreshments, food, beauty and personal cares & home care. In this report, discussions will be made on the types of pricing method along with their advantages and disadvantages and end up by stating the most appropriate Unilever pricing strategy.

Different Pricing Methods:
The types of Unilever pricing strategy discussed in this report include- Cost-based method of pricing, competition-based method of pricing, dynamic method of pricing and Penetration method of pricing.

Cost-Based Method of Pricing:
Some advantages & disadvantages of Cost-based method of pricing are discussed below-

 advantages & disadvantages Cost-Based Method of Pricing

Advantages:

  1. This Unilever pricing strategy has easy calculations for calculating the price, and it is easily understood.
  2. This method surely covers all the costs that are incurred.
  3. This method is logical, and it is fair.
  4. This method is beneficial, and it is very simple for making the decision for the appraisal of investments. Example- how the rate of return is is used in the company.
  5. This method is very beneficial for setting new prices and even for setting new & innovated products (Gillespie et al., 2018).

Disadvantages:

  1. This method never considers demand’s price elasticity & the demand.
  2. This method forgets the motive of their work in order to be more efficient.
  3. This method results in overpricing or underpricing.
  4. This method doesn’t pay heed to the situation of competition.
  5. This Unilever pricing strategy doesn’t consider investment returns and the requirements on capital.
  6. This method doesn’t consider Cost that are unavoidable or which is sunk in nature.
  7. In this method, they do not lead potentials of the market.
  8. This demand is very flexible in case of demand level.
  9. In this method, they cannot measure the price for making the decision and find it very difficult to do so (Vujicic, Vujicic-Tomic and Klaric, 2019).

Competition Based Method of Pricing:
Some advantages & disadvantages of the competition-based method of pricing are discussed below-

Advantages:

  1. The competition-based method of pricing is one of the essential Unilever pricing strategy that helps in controlling the business competition for the prevention of market share losses and customers to competitors. They assume that they have enough intelligence from the competition by adopting the correct technology. By this intelligence, they can respond to every competitor's move.
  2. The competition-based method of pricing is considered as one of the important things in shopping online that help them in making decisions regarding the final purchase. Whereas, 1st indicator is the pricing of the market, which is more than 90%. According to the facts of e-commerce, it was seen that shoppers mainly visit three websites before purchasing a product.
  3. In the competition-based method of pricing, the initial step is dynamic pricing, which is the most advanced method in the competitive Unilever pricing strategy. With the help pf dynamic pricing, an industry can compete in a better way that will allow them to earn more profit.
  4. The competition-based method of pricing prices can be in combination with the strategy of price with others which is very efficient.
  5. The competition-based method of pricing does not consider price cutting. While they take some opportunity in increasing the Cost for monitoring the competition (Fisher, Gallino and Li, 2018).

Disadvantages:

  1. The competition-based method of pricing focuses more on their competitors because of this they may miss overhead & production cost due to this, they may take a risk in losing the margin.
  2. The competition-based method of pricing for small companies creates resources like money, technologies & additional staff that will be able to sustain the Unilever pricing strategy without any hesitation.
  3. The competition-based method of pricing settles the intelligence of competition price, which assumes that the competitors may have products prices in a correct manner. But these prices may not provide any benefit to the company because they create disharmony. Hence, it is better to mix the competitive price with other strategies.
  4. The competition-based method of pricing is not good for premium products (Faith and Agwu, 2018).

Dynamic Method of Pricing:
Some advantages & disadvantages of the dynamic method of pricing are discussed below-

 advantages & disadvantages Dynamic Method of Pricing

Advantages:

  1. The dynamic method of pricing is beneficial for providing a venue that will help them to gain more sales. With the help of this pricing, the prices of the products increase and the demand also increase. This method boosts sales or profit.
  2. The dynamic method of pricing helps in beating the competition.
  3. The dynamic method of pricing benefits the company by profits which are remained. This will provide them with freedom and flexibility in focusing on other companies. This Unilever pricing strategy even focuses on the other revenue sources, which breaks at times. Sometimes, this freedom and flexibility help in breaking the operations of the business.
  4. The dynamic method of pricing benefits in providing control indirectly over inventory. This will allow them to give a good discount for products that are overstocked. This reduces high price on the items that have a high demand for maintenance of the supply chain for generating revenue (Akbulut and Okuyan, 2017).

Disadvantages:

  1. The dynamic method of pricing may benefit the gain in a high margin of profit, which increases sales, and in case it is not properly implemented, it may lead to losses in customers & sales.
  2. The dynamic method of pricing helps the customers to purchase the product in such a way that they tend to pay more than the others.
  3. The dynamic method of pricing may cause fluctuations in price in the segment of the market due to which competitors may lower the prices may plan to make the volume back and even increase the price (Vermeulen, and Bezos, Amazon Technologies Inc, 2017).

Penetration Method of Pricing
Some advantages & disadvantages of Penetration method of pricing are discussed below:

Advantages:
This Unilever pricing strategy has the ability to make the product so attractive that the customers find it appealing and keeping in mind the product’s cost (Yan et al., 2017).

Disadvantages:
Whereas, this method is mainly used by those companies who are not very successful either the company has insufficient in attracting the customers or they are unable to provide then with adequate profits they need (Du and Chen, 2017).

The most appropriate pricing method for “UNILEVER” company is the competitors pricing method. This method helps the company in controlling the business competition for the prevention of market share losses and customers to competitors. They assume that they have enough intelligence from the competition by adopting the correct technology. By this intelligence, they can respond to every competitor's move. The competition-based method of pricing is considered as one of the important things in shopping online that help them in making decisions regarding the final purchase. Whereas, 1st indicator is the pricing of the market which is more than 90%. According to the facts of e-commerce, it was seen that shoppers mainly visit three websites before purchasing a product. This Unilever pricing strategy will help the company to set the price as per their competitor’s level and help them to sell in any market in which many companies sell the same and even similar products. The competition-based method of pricing prices can be in combination with the strategy of price with others which is very efficient.

Conclusion
From this report, it can be concluded that Unilever Company is one of the leading companies in the UK. The company has achieved success as approx. 2.5 billion people use this company’s products so that they can feel and look good by applying the effective Unilever pricing strategy. The company is mainly categorized in 4 divisions those are refreshments, food, beauty and personal cares & home care. Unilever is considered as one of the largest soap producers in the entire world, and it is one of the oldest companies which is multinational, the company's products are made available in more than 190 countries. After studying this report, it can be said that discussions that are made on the types of pricing method and looking at their advantages and disadvantages, it was stated that the most appropriate pricing method for "UNILEVER" company is the competitors pricing method. This method helps the company in controlling the business competition for the prevention of market share losses and customers to competitors. They assume that they have enough intelligence from the competition by adopting the correct technology. This Unilever pricing strategy will help the company to set the price as per their competitor’s level and help them to sell in any market in which many companies sell the same and even similar products.

Reference:
Akbulut, M. and Okuyan, M.C., 2017. Dynamic decreasing pricing method with social media effectiveness. Unilever pricing strategy ??????????? ?????? ???? ??????????? ????????? ??????-????????????? ???????????, (2), pp.113-120.

Du, P. and Chen, Q., 2017. Skimming or penetration: optimal pricing of new fashion products in the presence of strategic consumers. Annals of Operations Research, 257(1-2), pp.275-295.

Faith, D.O. and Agwu, E., 2018. A review of the effect of pricing strategies on the purchase of consumer goods. International Journal of Research in Management, Science & Technology (E-ISSN: 2321-3264) Vol, 2.

Fisher, M., Gallino, S. and Li, J., 2018. Competition-based dynamic pricing in online retailing: A methodology validated with field experiments. Management Science, 64(6), pp.2496-2514.

Gillespie, E., Campbell, P.R., Halcovich, C. and Gaebler, J.A., 2018. PHP45-AN INITIAL ANALYSIS OF THE COST-BASED PRICING REVISIONS IN JAPAN. Value in Health, 21, p.S158.

Unilever UK & Ireland. 2020. Home. [online] Available at: [Accessed 3 April 2020].

Vermeulen, A.H. and Bezos, J.P., Amazon Technologies Inc, 2017. Method and system for dynamic pricing of web services utilization. U.S. Patent Application 15/652,158.

Vujicic, M., Vujicic-Tomic, B. and Klaric, M., 2019. MEETING HALFWAY--COMPARISON BETWEEN COST-BASED AND DEMAND-BASED PRICING METHODS. Unilever pricing strategy UTMS Journal of Economics, 10(2).

Yan, X., Gu, C., Li, F. and Wang, Z., 2017. LMP-based pricing for energy storage in the local market to facilitate PV penetration. IEEE Transactions on Power Systems, 33(3), pp.3373-3382.

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