Johnson and Johnson is a US multinational corporation established in 1886. The firm and its branches carry out research and development, manufacture and selling of different products in the healthcare industry. The corporation runs under three segments – medical devices, pharmaceutical and consumer. The company primarily focuses on products associated with human well-being and health. The company has its headquarters in New Brunswick, New Jersey. The company has about 250 subsidiaries operating in 60 nations, and its products are sold in more than 175 states. The company's brands comprise a range of household brands of drugs as well as first aid goods. The company balances its short-term and long-term objectives in its strategic planning by concentrating on the crucial sector and basics of the pharmaceutical industry. The firm invests hugely in research and development and introduces new business opportunities. The firm as well focuses on safety precautions, environment and employees welfare to make sure that it ethically undertakes business. The corporation is listed in the Fortune 500 firms, and it aids in enhancing that quality of life globally through researching healthcare products that will assist in curing different life-threatening diseases across the world. Also, the company's researchers are devoted to working with mothers for ensuring that the firm offers products which best fulfill the healthcare needs of mothers.
Johnson $ Johnson Pricing Model
The company is a well-known brand and yet it has an affordable pricing technique to ensure that ordinary people may purchase the commodities. The business follows an extremely well-structured pricing strategy. Primarily, the company keeps its price in the consumer price index range. It is known that the main segment of the firm's market is comprised of consumer items. So, it is aware of the affordability principles of the customers in the market before setting the prices. While the company follows a psychological pricing method the company's products are famous for their excellent quality and outstanding packaging, it has chosen affordable rates. In the firm's medical products segment, it works together with the government to set reasonable prices for the products. Also, this demonstrates the firm's socially responsible goals.
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The firm has an effective team chosen for setting the prices of items. This team puts into consideration various factors such as their cost of production, target market, supply, demand, and as well the capacity to pay of the consumers. Following the accurate assessments and calculations, the company fixes the prices for the products. Some of the company's products such as the baby care items as well as consumer commodities have prices fixed at little high prices. This is since individuals purchasing these products are willing to pay a specific percentage high rate because of the good health and quality for their families.
Psychological Pricing for Johnson & Johnson
Psychological pricing involves pricing the products so that they appeal to the emotions of consumers instead of their logic. Done correctly, it could give a company an edge and support it in increasing sales. Psychological pricing entails setting prices marginally lower than rounded numbers, believing that consumers will not rounded up the costs, and thus they will take them as lower prices compared to what they are. The psychological pricing model is founded on the belief that buyers are inclined to process prices from the left-most digit to the right and therefore will tend to overlook the last few digits of a price (Cialdini & Cialdini, 2007). A good case of psychological pricing is to set the price of a shoe at $999, instead of $1,000. This form of pricing is prevalent for consumer goods. A disparity in this model is through setting prices higher, anticipating that consumers would attach more significance to a product when the price is fixed at a premium level. Therefore, for its consumer products, Johnson & Johnson should mainly use the psychological pricing model.
Using Psychological Pricing to Increase the Company's Bottom Line
There are different tactics which the company could apply it to increase its bottom line. First, the company should begin with the basics. The prices chosen for products hugely affect the sales volume. If the prices are set very low, the consumers will view them as being ineffective or cheap. Conversely, when the rates are set very high, the buyers would feel that they are tricked or overcharged to pay too much. Thus, in applying the psychological pricing technique, the company should set its prices by first determining the exact worth of its products (Kearns, 2014). After establishing a baseline for each of its products, it can apply various psychological pricing mechanisms for increasing its sales.
One, the company should appeal to value-driven customers. To appeal to these customers, the firm should set its prices for the consumers to perceive a bargain while they look at the price tag. This could be achieved by using odd numbers rather than rounding up to whole numbers. For example, if the company prices one of its consumer products at $299.99, it will be seen as better value compared to when the price is $300, although it only has a cent difference (Cialdini & Cialdini, 2007). This is because people tend to read from left to right, and a 2 is the first digit. Customers would subconsciously see the price as nearly to a cent since with cents being attached to a selling price the consumers will typically round down, rather than up.
Another tactic the company could use is number 9. When products are sold at a price with the number 9, they will be purchased more compared to products priced at different prices. For instance, if the company priced its consumer products at $199, it would sell more than when it prices them at $195. According to Poundstone (2011), the use of the number 9 in prices increases sales by 24% compared to prices which have whole numbers.
Further, the firm should employ the approach of giving away things for free in line with its psychological pricing. Usually, people tend to like getting something for free like a bonus pack, rather than getting a discounted price. Therefore, the company could try attaching free things on top of its products. For example, a package of a baby care product could come with a free body lotion. Lastly, the company should try applying the tactic of appealing to class-conscious customers. Because the company's products are known for their superior quality, the company could try setting a high price label and appealing to buyers who are class-conscious. Some customers want to be sure that they get quality and exclusiveness, and they dynamically favor paying a higher price to guarantee it (Shen & Rao, 2016). Consumers usually perceive products with high quality as being of high quality.
Conclusion
Johnson & and Johnson has proved itself as a market leader in the healthcare industry. The company has been able to grow and expand to different parts of the world, thanks to its growth strategies aimed at creating value via innovation, expanding its global reach, and operating purposely at the highest level. In general, the company uses the affordable rate pricing strategy, where its products are priced at an affordable rate that the common man can afford. While the company somehow uses psychological pricing, it is not its main pricing strategy. Thus, this paper has discussed how the company could employ the psychological pricing model by using various tactics associated with this model. Through these tactics, the psychological pricing method could effectively work for the company.
References
Cialdini, R. B., & Cialdini, R. B. (2007). Influence: The psychology of persuasion (pp. 173-174). New York: Collins.
Kearns, S. (2014, November 12). How to Use Psychological Pricing to Increase Your Bottom Line. Retrieved from https://quickbooks.intuit.com/r/pricing-strategy/use-psychological- pricing-increase-bottom-line/
Poundstone, W. (2011). Priceless. Oneworld Publications.
Shen, H., & Rao, A. (2016). Looks good to me: how eye movements influence product evaluation. Journal of Consumer Psychology, 26(3), 435-440.
