Guinness - Price

Price is "the value placed on what is exchanged", to a buyer (Dibb, Simkin, Pride, Ferrell, 2012). Price is one of the most important elements of the marketing mix as it is the only element with generates a turnover. For this reason, price must support the other elements of the marketing mix. For example, it costs to design and produce products, it costs to distribute products and it costs to promote products. The price of a product should reflect the supply and demand relationship. Pricing a product too high, or equally too low, could result in sales loss for a company.  

Factors affecting pricing decisions:

Pricing objectives:

"Overall goals that describe what a company wants to achieve through its pricing efforts" (Dibb, Simkin, Pride and Ferrell, 2012). Many marketers use a combination of pricing objectives including return on investment, cash flow, product quality, profit and market share. In the case of Guinness, they operate a marketing orientated pricing policy as a combination of costs, competition, explicability and value to customers. It is a price-quality relationship and product-line pricing blend to determine its brands' prices.

Costs:

When establishing a price, cost must be taken into consideration. For example, Guinness want to make a profit, therefore the selling price of their products must incorporate production costs. In order to make a profit Guinness must first break even and anything after that will be profit. If Guinness did not cover all expenses into their selling prices, the company most likely would not survive.

Buyers' perception:

This refers to what a customer thinks the price of a product should be. More often or not, a customer sees a higher price as a higher quality product. Customers interpret prices by an internal reference price, which refers to a "price developed in the buyer's mind through experience with the product" and an external reference price, which refers to "a comparison price provided by others" (Dibb, Simkin, Pride and Ferrell, 2012). In July 2007, Guinness was priced at €5.20 a pint in Dublin. This price is a liitle more than competitors' prices. However, as customers see Guinness as a premium drink, as in there is no other stout like Guinness, this price is feasible.

Competiton:

It is important for any company to know who their competitors are. A company may set prices below or above competeting products. Competitor orientated pricing forms part of Guinness' pricing strategy. This is because Diaego plc takes the going rate for Guinness brands. Again, the unique taste of roasted barley and malts with a light brown creamy topping is an advantage here as there is no other product on the market with such a taste. 

Regarding reacting to competitors' price changes, Guinness has never followed price reductions. If they did this could cause contrary to the brand image as it is seen as a premium stout.

Types of pricing strategies:

Differential pricing:

"Changing different prices to different buyers for the same quantity and quality of product" (Dibb, Simkin, Pride and Ferrell, 2012). For example, Guinness may decide to up their prices in Ireland when tourist season is high, especially around St.Patrick's Day.

Product line pricing:

This refers to "pricing a whole line of items rather than setting prices for individual items seperately" (Dibb, Simkin, Pride and Ferrell, 2012). Premium pricing, used by Guinness, is covered under this heading. Premium pricing is used to reflect the quality of an item through the price of an item. It is often used in markets with product specific features. For example, Guinness is specific because it is a stout and it's quality is reflected in it's premium pricing.

Psychological pricing:

This is based on the theory that prices have a psychological impact. The positioning of the price of the product in the market is considered with psychological pricing. For example, if Guinness ever decided to use this strategy, they could sell a pint for €4.99. The reason why this method works, although it is not used by Guinness, is that the consumer will still think they purchased something for less than €5, even though it was just a cent away.

Other pricing information:

Guinness has had it bads times, ethnically. The Competition Authority were close to charging Guinness with price fixing charges in the late 90s. This came about after a sales representative made accusations that during his time at Guinesss, he was present at price fixing meetings with top management in the business. However, despite this, Guinness has majorly benefited from being an internationally recognised brand as many of such regulations which do still apply in Europe, do not in international countries, where stout is enjoying high sales and profits e.g. in the Central African Republic. In the Central African Republic, the stout is associated with sexuality which in Europe would be seen as morally wrong.

References:

1) Dibb, Sally; Simkin, Lyndon; Pride, William M. and Ferrell, O. C. (2012). Marketing: Concepts and Strategies (6th ed.).London: Cengage.

2) Guinness® – beer made of More™ Available at: https://www.guinness.com/en-gb/ (Accessed: 11 November 2016)

3) Marketing mix (4P’s) price and pricing strategies (2015) Available at: http://www.learnmarketing.net/price.htm (Accessed: 20 November 2016).

4) Suttle, R. (2016) "What is a product mix?", Small Business Chron