Pricing strategies of Amazon Essay Example | Topics and Well Written Essays - 3000 words

Pricing strategies of Amazon - Essay Example 231). The most important factor to consider is the pricing of a product, as it is from this that the company will be viewed by the other entities in the industry and also potential customers. In achieving this, companies in general consider three main factors in coming up with viable pricing strategies that ensure their overall success. These are in terms of their basis of laying emphasis. There are the cost-based pricing strategies, which focus on a means of determining prices through incorporation of profit essentials in the product (Cryns 2002, p. 120). Moreover, there is the pricing based on customer observation whereby a business entity considers the best price that could fit accordingly to the customer base of that product. In addition, there is the pricing based on competitor substitutes, which considers competitor pricing to come up with prices that would most likely put a business at a better position for proper and advantageous competition. While these are the main pricing criteria that most companies consider prior to formulating a viable strategy, other entities such as Amazon maximize on their potential in regards to formulating their pricing strategies (Wuebker 2008, p. 111). ... Later on, it diversified into the sale of media such as CDs, DVDs and such other forms as MP3 based media files. After some years of relatively moderate growth, Amazon later on increased in terms of revenue and overall growth to become the largest online store (Smith 2011, p. 167). In addition, the store has diversified its products range to include most basic home appliances, extending further to even foodstuff. In order to achieve this status, and maintain these growth standards, Amazon has strategized effectively, successfully implementing a variety of pricing tactics that have ultimately exalted the entity forward. In light of the above, the first strategies that Amazon employs in attaining its status is the use of dynamic pricing mechanisms in order to spread their market base. In this form of pricing strategy, a company distinguishes between its customers, analyzing the various features that set apart the various categories of customers (Burton & Holden 2010, p. 145). Through t his research, a company focuses on such aspects as the frequency and trend of shopping that a faction of consumers adapts to in the course of carrying out their transaction. Through this kind of critical analysis, a company comes up with prices for its goods in relation to the trends that customers have adopted while purchasing products. As such, the ‘peak’ periods that most customers are carrying out their transactions are often characterized by higher prices than the other periods that customer density is relatively low. In its practices, Amazon extensively uses dynamic pricing strategy to delimit the prices of its products in relation to the cycle of demand as occasioned by the