Innovation, pricing strategy, and value creation across industries

Innovation and pricing are concepts that the manufactures and service providers should focus on. This paper focuses on how value is created on various products and services highlighting on the impacts value addition can bring to the company against the consumer behavior which is the center of focus. It looks at innovation and price variance in different market segments and addresses various reasons for the variances in pricing and the reason for adopting such pricing structures.

The paper also critically analyses three different products and service sectors looking at price variances and other factors which create such disparities. A general analysis of the airline industry, telecommunication and the automobile industry have been used as the basis of understanding the existence of different pricing in different market segments and consumer segment.

Introduction

Innovation is an important aspect that companies offering services or products to consumers should dedicate much attention to as it affects the profitability of the company in the long run. Customer demands and the ever shifting trends in tastes and preferences are the key drivers of invention. The consumers generally are looking out for unique services and products which are considered trendy or are either in line with the latest technological advancements. Consumption in itself has become a complex phenomenon that needs much attention in order for a company to remain in business and attain profitability. While providing services, consumer behavior should be closely monitored so that any innovations are geared towards satisfying the identified needs. Lack of focus on consumer demands and the inability to conduct a detailed market research may result into the introduction of products and services which do not satisfy the customers leading to loss of customers. Customers need to be retained at all cost for a business to be sustainable and much effort should be made towards increasing the customer base with minimum exodus to competitors. Innovation therefore is a tool that can be used to change the perception of the consumers about certain products or services which are therefore reflected in pricing.

Segmentation Pricing

Segmented pricing is a situation that arises when a company sets different prices for the same product or service without having incurred any additional cost in production or distribution. It is a scheme that the companies employ to tae advantage of the pricing disparities and take advantage of the different geographical regions. Price segmentation can be done time. For instance during the peak holiday seasons, the rates in the hotel space are hiked compared to off peak seasons. Location also is a factor to be considered when pricing since certain areas have low competition which offers the product or service provider the flexibility of determining prices based on the consumer behavior and demand. Also to be considered are the volumes and product attributes. Certain products are designed to target high end markets which therefore cannot fit in certain segments which therefore call for different price structure. In designing a pricing strategy, various factors have to be considered in order to sustain the business; the perceived customer value, competitive response, channels of distribution, cost parameters and congruence with the brand parameters. The perceived customer value will have a direct impact on the pricing structure if the customer is satisfied and get value for their money. Competition will on the other hand determine the structure to adopt and help in setting the benchmark for pricing in any particular marked segment. The distribution channels and other costs incurred are also costs that have to be contained in business some of which are passed on to the consumers in the prices hence the difference in prices (Derrick & Brad, 2008).

Different products and services are being offered at different prices in different customer segments. In the air line industry for instance, there are different price variations on offer for different categories of customers. The airline industry is a very competitive industry owing to the high number of companies offering the service as well as new entrants into the industry. It is the most affected industry by the ever changing global oil prices. The operators have adopted mechanisms to stay afloat and remain profitable despite the deviations in the fuel prices across the globe. In many occasions the providers have been forced to hedge on the fuel prices which are fixed and pegged to the dollar or a currency of choice to cushion them against the unforeseen rise in price or shortage of jet fuel which is the most expensive. The dwindling prices and jet fuel costs could have however been passed on to the consumers but due to hedging, the costs are contained which has continued to mare air transport still affordable and the most preferred mode of transport linking several places. Consumers travel around the world and they have different goals to achieve. Others travel for leisure, others for business while for others it is considered the fastest and have no choice when but to use the planes. It is for this treason that different pricing have been adopted to contain different customer segments of which high prices come with value addition in terms of comfort and additional services to satisfy different categories of consumers. Due to competition, the industry has had to operate within certain rates in order not to chase away the consumers. Therefore the pricing schemes adopted in this industry have are affected by competition.

The other product which is affected by the different pricing menus is the lucrative telecommunication industry. Communication has evolved over the years and with the continued technological advancements, consumer tastes and preferences have changed tremendously. Very technical devices have been unveiled in the market providing the consumer with up to speed access to information and convenience in passing information from different parts of the world. The technology world has provided linkages and platforms to conduct business from one part of the world allowing information sharing to be real time. It has changed the lives of many individual by providing opportunities to earn a living providing employment hence a tool that has elevated poverty in most of the poor economies. The product range for the devices have been witnessed in different market segments with different features which all target different market segments. The price variation comes with the addition of features which are useful for others and not applicable to some categories of consumers whose main goal is to perform basic communication and have access to information and stay abreast with the happenings around the world. High end devices have therefore been introduced as well as the most basic models which all serve the purpose. The added value in the features is what makes the price difference. However in the markets based on the geographical regions the same devices attract different prices subject to competition and value as perceived by the customer and the convenience in obtaining the products and other available services in terms of after sales service and user help.

The other category which is affected by the different pricing menus is the automobile industry. The demand for cars around the world have continued to grow as people require the machines to enable them operate their businesses and for personal use. There is the comfort achieved in owning a car due to the convenience in getting to places and at the same time for security reasons. For others it is a status that shows excellence and therefore the choice of the model is a great deal. It is therefore for this and several other reasons that the industry has come up with different categories of automobiles to suit different market segments. With the advancement in technologies, more techniques are evolving as the consumer demands have shaped the manufacturers approach in manufacturing the machines. Consumers are demanding value for their money; they are also paying attention to the environment and prefer the greener technology which is more environmentally friendly. The technology in use in terms of fuel consumption among other features such as safety standards are all that shape the automobile industry. It is an industry which faces competition due to the high number of players. The manufacturers are in competition for the existing markets as well as the new markets which therefore affects the pricing structures adopted for several market segments. Different brand have been perceived to be superior and are well-known which have earned brand recognition and customer loyalty. The perceived quality has been used in determining prices as the consumers have faith in these brands even with the introduction of new models making it easier to market the new brands. Different segments of customers however demand for certain features and standards which have shaped the existing variance in the pricing for same models as other have added value which are translated in the final pricing. Others are custom made to include the features dictated by the consumers hence the disparities in the pricing structures.

In conclusion, value addition is a phenomenon that cannot be ignored in any business if profitability and sustainability is to be achieved. Consumption of various products and services have become complicated as the consumer behavior patterns keep changing by the day making the manufacturers and service providers to be up to speed with the trend. Innovation and Pricing should go hand in hand with value addition so as to ensure all the stake holders; the employees are satisfied with their service, the consumer gets the right quality of the demanded products and services and as well enable the investors to get a return on their investment.