The interview will focus on the pricing strategies used by data mining companies. The interviewee for the assignment is the manager of a regional data-mining company. The organization is a consulting service provider and software vendor. The company performs processes of appraising data and converting it into valuable insights fundamental for business decisions. The interview details the pricing strategies and methods employed in the data mining industry.
The Company's Pricing Objective
The data-mining company falls under corporate retailing. The company belongs to a merchandising conglomerate that combines several retailing forms and lines under central ownership. Falling under this umbrella has enabled the organization to achieve economies of scale, acquire better-trained employees, gain better brand recognition, and greater purchasing power (Kotler & Keller, 2012). The company's primary pricing strategy is profit maximization. The company offers intelligent self-service analytic solutions with powerful data analytical and reporting capabilities to large and mid-sized companies. The company's pricing objective helps the company maximize its profit margins and maximize its net profit.
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The Sensitivity of the Company's Target Customer to Changes in Price
The company's clients are moderately sensitive to changes in price. Consumers generally accept small price increases when the company launches new updates or develops news solutions for businesses. To consumers, price increase implies that the company solutions are of excellent quality and value. However, consumers dislike sharp price increases (Kotler & Keller, 2012). The organization typically offers notice to clients before increasing the price of its solutions and services. The company's consumers tend to question price reduction. They tend to think that the solution is faulty, of low quality, or outdated and will be replaced by a novel model. The organization carefully monitors clients' concerns when it reduces the price of existing solutions.
Are Some Target Segments that are Less Price Sensitive than Others?
Some of the company's target segments are less price-sensitive than others. Large companies are less sensitive to an increase in price when compared to mid-sized organizations. Large companies are generally more receptive to price increase when likened to smaller companies, especially when the value of products or services corresponds to the price increase. Notwithstanding, both companies prefer small price increases regularly to a sudden and sharp increase. On the other hand, mid-sized companies are less sensitive to price changes compared to larger companies. Mid-sized companies may look at price cuts to reduce their expenses, while larger companies might question the reason behind price decrease.
Role of Competitors' Prices in Determining the Company's Price
The competitors' prices play a passive role in determining the company's price. The organization's response to competitors' prices will depend on the situation. The company will look at the competitor's resources and intentions and prevailing market prices. The company's response to a competitor's price will depend on its ability to cut costs or generate demand. The company looks to differentiate itself from competitors through its pricing. The company offers unique products and services to large and mid-sized companies. However, competitors cut their prices aggressively to disrupt the market; the company uses two approaches to compete. First, the organization differentiates its products and services from competitors to create value (Kotler & Keller, 2012). The organization can also introduce low-cost products and solutions to compete with other companies.
Method of Pricing
Data analytics and mining services are high-value investments whose benefits and costs are difficult to estimate in advance. There are several aspects that the organization looks at before determining the price of analytic products and solutions or for consultation services. The company will look at the complexity, cleanliness, and volume of data. The company will also assess the amount of internal capability and skillsets the clients have, the complexity and analytical detail required, whether Machine Learning or AI will be required in the solution, and how the analysis will be implemented. The company employs perceived –value pricing to set prices for its solutions, products, and services. Perceived value is typically dependent on product performance, client support, warranty quality, and the company's trustworthiness and reputation (Kotler & Keller, 2012). The company sets the price based on the consumer's perceived quality and the solution's value proposition.
Reference
Kotler, P., & Keller, K. L. (2012). Marketing management (14th edition). Prentice Hall, Harlow, ISBN, 10, 0273755021.
