Google's multiple pricing strategies across its diversified product portfolio

Google\'s Pricing Strategy And Competitive Advantage

Pricing Strategies

Pricing constitutes an important element of the marketing mix. It determines the amount of revenue and profit an organisation makes (Fifield, 1998). This means that an organisation\'s pricing objectives may be profit- or revenue-oriented (Smith, 2012). Pricing may as well be informed by the need to retain status quo or price leadership in the industry (Fifield, 1998). At Google, the overall objective of pricing is to maximise sales. This is particularly true for the company\'s core offering -- the Adwords online advertising service, which represents a major proportion of the company\'s total revenues. The offering is priced in a manner that ensures the company sells as much Adwords as possible.

Google relies on a number of pricing strategies namely: freemium pricing, market-oriented pricing, penetration pricing, and value-based pricing. The use of multiple pricing strategies is to a large extent informed by the company\'s increasingly diversified product portfolio, which ranges from web-based offerings and mobile applications to operating systems, hardware products, as well as fibre internet and cable television services. Freemium pricing essentially entails offering a service or product for free, but charging a premium for add-on features or functionalities (Smith, 2012). Gmail is one of the products on which this pricing strategy is applied. Market-oriented pricing refers to a pricing strategy where pricing is done on the basis of market conditions (Smith, 2012). Google uses this strategy for products such as Chromecast.

Penetration pricing involves setting low prices in order to gain market share in an industry dominated by large and powerful rivals (Smith, 2012). This is how Google\'s recently introduced offerings, particularly Nexus, Google Fibre, and cable television service, have managed to gain considerable market share in the rigorously competitive fibre internet and cable television industries. Google also relies on value-based pricing for some of its products. Value-based pricing entails setting prices on the basis of the perceived value customers attach to the product in question (Smith, 2012). At Google, this strategy is commonly used for the Adwords online advertising service. This service permits advertisers to bid for ad spots on the basis of the perceived importance of the ad.

Google\'s pricing strategy also encompasses flexible pricing as well as the use of discounts. An ideal example of flexible pricing at Google relates to the company\'s cloud service, wherein customers are not required to commit to long-term lock-in contracts. The service is also characterised by automatic discounts for increase usage. Additionally, the company provides six flexible bidding strategies for its online advertising service. The strategies are often developed around the specific goals of advertisers. These techniques are often important for attracting and retaining customers as well as responding to their needs (Smith, 2012).

Competitive Advantage

Google competes with several companies including Bing, Yahoo, Ask, and AOL, especially in the search engine category. The company also competes with companies like Amazon, Apple, IBM, Microsoft, and Facebook in categories such as cloud computing, mobile apps, operating systems, and hardware. Nonetheless, a major source of competitive advantage for the top search engine firm emanates from its pricing strategy, which provides both cost effectiveness and flexibility. For instance, Google\'s cloud services are up 15-40% cheaper than Amazon\'s. In addition to lower prices for cloud services, Google relies on per-minute billing and does not require customers to commit to lock-in contracts. The immense pricing flexibility provided by the company\'s online advertising service also distinguishes it from rival search engines. These aspects give the company an unparalleled price advantage in its industry of operation. In spite of this, it is imperative for the company to do more to make its prices even more attractive as the industry becomes more competitive every day.

Having the right marketing mix is crucial for success in a severely competitive marketplace. Consumers are increasingly attracted to organisations that effectively satisfy their need, offer the most competitive price, provide the right product at the right time and location, and engage them using the right channels. Google\'s marketing mix evidently demonstrates the organisation\'s commitment to delivering value to the customer in a constantly changing business environment. The organisation particularly possesses significant competitive advantage with respect to the four aspects of the marketing mix. From its search engine and flagship online advertising service to its cloud competing service, operating system, mobile applications, and a host of other innovative internet products, the organisation has without a doubt revolutionised the online realm. It is pretty much hard to imagine how the internet would be without Google.