However, the majority of consumers are neither sophisticated, nor interested to invest more than the average expensed in such products. Such a company would benefit from creating products that are addressed to a larger set of consumer to increase its profits by selling more products, rather than at higher prices. Many airline national companies used to maintain a high price level, but had to create cheap flights due to the emergence of low cost airline companies and market deregulation in the 70s in U.S. And 90s in Europe (Knorr and Zigova, 2004), and one example for this case is Iberia. 4. Markets. Market characteristics vary as well from one country/region to another, ranging from legal regulations (e.g. tariffs) to buying habits. The globalization phenomenon puts pressure on companies to be increase their worldwide reach. Usually companies resort to market segmentation before defining their products or pricing strategies and these strategies have to take under consideration the need to be present in as many and as different places as possible to be a global player. Thus, in markets with low-income consumers, low price products are more successful, whereas markets with high-income consumers have a large number of consumers willing to purchase high price products. L'Oreal has adopted different product ranges to better fit its current market segments: low price - mass products and high price - professional products even though initially the company positioned its products as medium to high quality products with corresponding prices.

Reasons for either low or high price products

Companies use positioning to create a certain image of their products in the consumers' mind. Price is one of the ways to create this image as in many instances is proportional to the products' quality or the social status reflected...

Aston Martin is a good example for this case. The car brand has stood as a symbol for luxury lifestyle for a long time and between 1994 and 2007 it was a division of the Ford Motor company. In this interval Ford Motor never tried to manufacture a cheap vehicle under the same brand, which could have jeopardized the brand's image and indirectly its value.
Conversely, a company known for its low prices may not find it opportunistic to adopt high price products in its portfolio because that could undermine its reputation as a cheap dealer. Ryanair is the largest European low-cost carrier and its low cost strategy was maintained from the company's creation. Given the emergence of low cost carriers, a change in the pricing strategy could be followed by a change in the consumer's perception.

Reference List

Baye, M. R, Morgan J. & Scholten P. (2003). Temporal Price Dispersion: Evidence from an Online Consumer Electronics Market. Journal of Interactive Marketing, Vol. 18(4): pp. 101-115.

Hirsh, L. 2006. How Big is Ecommerce? Ecommerce Times, February 27, www.ecommercetimes.com

Knorr, a. & Zigova, S. Competitive Advantage Through Innovative Pricing Strategy: The Case of the Airline Industry, Berichte aus dem Weltwirtschaftlichen Colloquium der Universitat Bremen, nr. 93, ISSN 0948-3829.

Mulpuru, S. 2006. U.S. eCommerce: Five-Year Forecast and Data Overview - North American Consumer Technology Adoption Study. Forrester Research, www.forrester.com

Thorlacius, B. 2006. Price Differentiation - the Law of One Price in Retail e-Commerce. Kobenhavns Universitet - Okonomisk Institut.