“The single most important decision in evaluating a business is pricing power”
So what exactly is price?
Price is what a customer is willing to pay or trade off in order to receive some sought of product or service. It is also the only element in the marketing mix that gives a monetary return to the company in comparison to the other three elements, which are product, promotion and place where the business is the one shelling out the money.
So essentially pricing is the moment of truth in business. Arguably a lot of strategy is just “talk” until you do or do not extract a price with customers. Pricing should reflect the value of what you are providing as well as the important objectives of your strategy.
The different kinds of pricing?
There are various kinds of pricing such as premium pricing,economy pricing, price skimming, psychology pricing and penetration pricing. I’m going to be focusing on penetration pricing with the help of the Australian energy market.
I work in one of Victoria’s energy telemarketing companies; yes I am that person who calls you up on a busy day offering you energy price comparisons. I haven’t learnt much from the job in general but what I have learnt is that there is a 90 % chance you are paying too much for your electricity bills.
Who is involved?
There are three different parties involved in the energy market that is the suppliers, retailers and the final consumers. We have enjoyed relatively inexpensive energy in the past but once the government sold the energy rights to the suppliers who then sell it to the retailers the energy sector has become one of most expensive in the world.
The suppliers set the actual price per kilowatt. An example of few suppliers is Powercor, Jemena, and United Energy each supplier has a designated area to supply to.
The retailers are considered to be the middlemen in the electricity market. Four of Victoria’s biggest retailers are Origin, AGL, Energy Australia and Momentum. However there is a new energy retailer in Victoria which is known as Globird Energy that have placed themselves in such a way providing consumers with the lowest price per kilowatt and in addition to that 40% discount of the electricity usage charges therefore we can clearly see that the company is using market penetration techniques capturing majority of the market. Penetration pricing is a strategy used by firms to attract customers to a new product or a service. The reason behind this strategy is that the customers will become aware of the product because of its lower price in the market place.
Personally I think that a major problem that Australia faces is that consumers are spectators, in other markets consumers drive production if companies do not meet the needs of the consumer, there will not be in business for long whereas it is the opposite in the electricity network industry. Consumers need to be brought into in a far more serious way that they are able to express their views directly to the business and regulators in a way that ensures that they deliver in the long-term interest of the consumers.
This clearly shows us the way how Marketing strategies are used in the electricity markets. Pricing strategies are key for such companies to ensure that we all believe that we are paying the cheapest prices. However, as the consumer we are still getting ripped off and we are oblivious to that!!
How much are you willing to pay for your electricity??
1.N.p., 2016. Web. 2 May 2016.
2.”The Power Of Pricing: How To Make An Impact On The Bottom Line”. PwC. N.p., 2016. Web. 2 May 2016.
3.“Cheap Electricity Suppliers, Electricity Providers Melbourne, Victoria – Globird Energy”. Globird Energy. N.p., 2016. Web. 2 May 2016.