Aggressive Pricing Strategies Research Articles

Imperfect history-based price discrimination with asymmetric market shares

We consider a duopoly model with history-based price discrimination where firms inherit asymmetric shares of consumers that they might partly recognize according to the degree of information completeness. We analyze the impact of the amount of information on market configuration, profits and welfare. With high degrees of information completeness and sufficiently small asymmetries in the market shares, firms are more likely to use aggressive pricing strategies, both poaching rival's consumers. Otherwise, firms adopt different pricing strategies and price discrimination is enforced only by the smaller firm. Greater information completeness has a non-monotonic effect on profits and a decreasing effect on welfare. Finally, we show that the case with perfect information is a special case whose results do not hold when even a small degree of uncertainty is introduced in the game.

Applying Predator—Prey Model to Companies Practicing—Undergoing Dumping. Theoretical Basis and Empirical Notes

This article explores the potential application of predator-prey theory to understand and model the dynamics of commercially aggressive companies involved in persistent price dumping. Drawing inspiration from ecological systems, where predator-prey interactions govern population dynamics, we adapt the underlying concept to the business realm, specifically focusing on companies engaging in aggressive pricing strategies that negatively impact competitors. Through a formal model inspired by Lotka-Volterra differential equations, we aim to capture the intricate interplay between predatory companies (engaging in not sporadic dumping) and their prey counterparts (those impacted by it). The explorative article concentrates on industries where aggressive pricing strategies, such as dumping, play a pivotal role, i.e. in sectors like steel production, airline services, and e-commerce (alongside insights into industry-specific dynamics and competitive landscapes). It adopts a mixed-methods approach based on a critical analysis of both literature and industry evidence, providing a theoretical and operating model complete with a numerical simulation. The application demonstrates that the dynamic interactions between prey and predator result in oscillating cycles, i.e., a delicate equilibrium and associated fluctuations (depending on the characteristics and assumptions related to aggressiveness and resilience of the two species, the estimation of parameters and growth rates, the institutional response – authorities constraints, intervention, protection, etc.) that arise as prey and predators influence each other’s populations in the shared ecosystem (market). The interdisciplinary nature of the issues provides valuable insights for policymakers, businesses managers, and industry stakeholders when navigating difficult competitive landscapes on the edge of (un)fair play and responsibility. Limitations and future directions of research are provided.

Decarbonisation: A Case Study of Malaysia

Limiting global warming to well below 2°C demands an urgent acceleration of decarbonization efforts, posing challenges in multiple sectors like transportation, energy efficiency, and steel production. The feasibility of achieving these targets, akin to the transformation seen during the collapse of the Soviet Union, is being questioned. Yet, hope lies in leveraging tipping points within complex systems for rapid change. Internal carbon pricing (ICP) emerges as a pivotal tool in this endeavor, enabling companies to assess investments, manage risks, and align strategies towards a low-carbon future (Riedel et al., 2021; Trinks et al., 2022). ICP drives decarbonization across industries and influences capital investment decisions by estimating carbon costs. Companies like LG Electronics, Microsoft, and Royal Dutch Shell have adopted ICP, further reinforcing its value in transitioning to sustainability. Major economies have implemented carbon pricing policies, yielding significant emissions reductions. In China, aggressive carbon pricing strategies could drive notable energy consumption reductions (Fan et al., 2014). Meanwhile, Malaysia faces a challenge in reducing carbon emissions, with strategies like renewable energy integration, energy efficiency enhancement, and sustainable transportation promotion (Farabi et al., 2019). This study focuses on Malaysia's decarbonization efforts, aiming to illuminate factors influencing corporate decarbonization in alignment with national climate targets. Addressing gaps in sector-specific decarbonization studies and exploring strategies that make decarbonization a competitive advantage will provide critical insights for effective policymaking and sustainable practices, contributing to global climate action. Keywords: Decarbonization, Malaysia, Net-zero emissions, corporate practices.

Netflix’s growth in India on a slippery turf

Research methodology A secondary research method was used to collect data for this case. The authors have made use of newspaper articles and published articles written by journalists and experts, which are available in the public domain. Case overview/synopsis This case discusses the hurdles faced by Netflix in India. Netflix experienced rapid growth ever since its entry into the Indian over-the-top (OTT) sector. The aggressive pricing strategies by OTT competitors put Netflix in a defensive position in India. Netflix introduced the low-priced mobile-only plan to attract price-sensitive Indian consumers. However, this was not sufficient. Netflix was forced to reduce the price of all its plans in December 2021. The dilemma faced by Reed Hastings (Founder and Co-CEO, Netflix) was whether the revised price was low enough to hold on to existing subscribers and attract new subscribers in India. Netflix was caught between the rock and the hard place in its pursuit to achieve its target of achieving 100 million subscribers from India versus continuing its skimming-pricing strategy. This case highlights the compound challenges of low household income in India and high-income inequality resulting in a lower available market for multinational service providers such as Netflix. The pricing plans and features of OTT competitors in India have also been discussed in sufficient depth to facilitate analysis and classroom discussion by the target audience. Complexity academic level Undergraduate students studying marketing management and basic marketing courses in business management and commerce streams can use this case. This case can also be used for marketing specialization courses at the undergraduate level.

Netflix in India: expanding to success

Learning outcomes After completing the case, students should be able to understand: the importance and uniqueness of the individual market and developing a suitable marketing strategy. The concept of value creation and learn the importance of developing the right value proposition to compete and succeed in a market. The target audience and how to create the right marketing mix. Competition in a digital landscape and the importance of developing an appropriate strategy to counter its rivals and position the brand effectively. Case overview/synopsis During his visit to India in December 2019, Netflix’s founder and chief executive officer Reed Hastings talked about a series of steps the company had taken in the recent past to successfully face stiff competition and move towards achieving its stated target of 100 million viewers. These steps involved significant changes in their marketing mix such as reworking their pricing, developing a rich portfolio of Indian content and building various partnerships. Since Netflix’s launch in India (December 2016), it faced fierce competition from players such as Hotstar and Amazon Prime, both of whom had developed a rich portfolio of Indian content and adopted a very aggressive pricing strategy thus, making these changes essential. At the time of their launch, Netflix had set a very ambitious target of gaining 100 million viewers within five years (by 2021) while adopting a premium pricing strategy and positioning themselves uniquely based on their international content. They quickly learned that they would have to reevaluate their approach if they wanted to achieve their target on time. The changes announced by Hastings were an effort in that direction. The moot question was whether these steps would help Netflix India reach its goal. This challenge was further compounded by an almost 40% hike in data tariffs by three major wireless carriers considering most Indians watched over-the-top media content on their mobile phones. Complexity academic level The case is designed for undergraduates, as well as for fundamental marketing courses in the Master of Business Administration and other graduate level programmes. It can be taught in the Principles of Marketing, Marketing Strategy and International Marketing courses. It is ideal for topics such as understanding the operation of a digital business in a new market, customer value creation and value drivers, brand and brand positioning, product promotion, strategies for business growth and expansion, fighting competition in a digital landscape. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 8: Marketing.

Tourism in the post COVID-19 era: evidence from hotels in the North East of England

PurposeThis paper aims to examine developments in tourism during the COVID-19 pandemic using the hotel sector in the North-East of England as the area of study. The country has attracted a lot of attention not only because of its importance as a tourism destination but also due to its rather controversial management of the pandemic at least in its early stages.Design/methodology/approachFifteen semi-structured interviews based on ten open-ended questions were conducted with North East of England-based hotel managers of international brands on the level of their hotels’ preparedness to effectively deal with pandemic cases. The interviews took place in August and September 2020 with participants kept anonymous.FindingsMeeting new operational and bureaucratic requirements added to the cost structure and proved a major challenge for managers who saw their hotel occupancy rates and revenue collapsing within a short period of time. Innovative and aggressive pricing strategies were introduced to lure especially younger travelers in the absence of business clientele. Staff were made redundant and/or asked to work overtime making effective human resource management very difficult.Originality/valueThis is one of the first research attempts to highlight the importance of the COVID-19 pandemic for the hotel sector in a major region of the UK. The paper also attempts some generalization by discussing managerial implications and suggesting a possible way forward for the hotel sector. Developing resilience by building on previously used successful business practices proves of essence.

Pricing of tobacco products: Pre and post GST implementation

There is ample evidence stating that any taxation policy that effectively increases the real price of tobacco products reduces its use. In the past, several countries have documented instances; wherein the intended effects of tobacco taxation were undermined by aggressive pricing strategies of the industry. However, there is a dearth of such evidence in Indian context. Hence, the current study was conducted to ascertain the changes in the retail price of locally available tobacco products during pre and post GST period in India. This cross-sectional analytical study was conducted among all available tobacco products in the states of Meghalaya, Odisha, Puducherry and Telangana. The information on maximum retail price (MRP) pre and post GST implementation on tobacco products was gathered from the owners of Point of Sale (PoS), vendors and retailers of various tobacco products. The results showed that of the total 154 brands observed pre and post GST implementation, 33.12% [95%CI 25.75–41.15] did not exhibit any increase in their price. The proportion of tobacco product brands with decrease/no change in price was a higher in Meghalaya (PR = 44; 95%CI: 6.32–306.3), Odisha (PR = 23; 95%CI: 3.25–162.7) and Puducherry (PR = 1.48; 95%CI: 0.1–22.84) as compared to Telangana. As compared to cigarettes, smokeless tobacco (PR = 1.84; 95%CI 1.16–2.89) and bidi (PR = 1.74; 95%CI: 0.78–3.9) had more number of brands with a decrease/no change in price post GST implementation. Moreover, four new brands of smokeless tobacco were introduced into the market following GST implementation. The study clearly suggests a departure from the outcomes envisaged by taxation policy on tobacco products in the country. Given the importance of price as a determinant in tobacco use especially among youth, there is an urgent need for strengthening our tax regime for tobacco products.

Exploiting a low tax system: non-tax-induced cigarette price increases in Taiwan 2011–2016

IntroductionThis study aims to analyse the non-tax-induced price increasing strategies adopted by tobacco industry in Taiwan, a high-income country with comprehensive tobacco control policies but low tobacco taxes and a...

Evaluating horizontal mergers in the presence of price promotions

In this paper, I investigate the impact of a horizontal merger between firms that use price promotions. I find that after the merger, the merged firms increase their prices, but coordinate the promotions by never discounting their products simultaneously. The non-merged firm responds with a more aggressive pricing strategy, offering deeper and more frequent discounts. The effects of a merger on the firms’ profits and the consumer surplus are very small relative to the case with no promotions. These conclusions are not affected by the size of the change in market concentration or by the degree of substitutability between the merging products. Thus, the use of price promotions by the merging firms can be viewed as a mitigating factor by the antitrust authorities.

Effects of Marketing Strategies on the Performance of Small and Medium-Scale Enterprises in Kogi State

This study focused on the effects of marketing mix strategies on the performance of SMEs in Kogi State. To achieve the study’s objectives, a survey research design was adopted. A purposive sampling was used, and 300 respondents were selected. Findings show that promotion strategy relates negatively and significantly with sales and profitability performance of SMEs in Kogi State. Findings further show that distribution strategy significantly and positively relates with sales performance; while pricing strategy significantly and positively relates with the profitability performance of enterprises in Kogi State. The study concluded that marketing mix strategies have significant effects on sales and profitability performance of SMEs in Kogi State. The study recommends that SME owners should adopt less of promotion strategy to achieve high sales and profitability performance in the business environment of Kogi State, and that more aggressive distribution strategy and pricing strategy should be adopted to sustain sales and the profitability performance of their enterprises in Kogi State. Keywords : Marketing Environment, Marketing Strategies, Sales, Profitability DOI : 10.7176/EJBM/11-7-03 Publication date :March 31 st 2019

Sustainable trade promotion decisions under demand disruption in manufacturer-retailer supply chains

Trade promotion plays a critical role in real-world marketing and operations management. However, previous research paid rare attention to how to provide trade promotions in a sustainable manner when consumer demand is disrupted. Considering that demand disruption is becoming surging because of the digital economy, it is quite necessary to discern the managerial implications for sustainable trade promotion practice in demand disruption scenarios. For this purpose, we analyze trade promotions under demand disruption by integrating demand uncertainty and limited capacity into a stylized demand disruption model. Three trade promotion types, i.e. off-invoice, scan-back, and revenue-sharing, are examined, and optimal promotion decisions are derived for each strategy. Our results show that both manufacturer and retailer would adopt aggressive pricing strategies as the demand disruption being intensified. For trade promotion strategies, our results show that, for a certain level of demand disruption, the manufacturer prefers off-invoice rather than revenue-sharing when the manufacturer needs to offer a more aggressive trade promotion. This result indicates that, when aggressive trade promotions are needed, the manufacturer may be worse off by a revenue-sharing strategy, even though the revenue-sharing could coordinate a supply chain.

Bundling, Vertical Differentiation, and Platform Competition

Abstract This paper studies the bundling strategies of two firms that each sell a horizontally differentiated platform and a complementary good. When the complementary goods are vertically differentiated, the firm that sells the superior one can commit to a more aggressive pricing strategy through bundling. In the presence of asymmetry in externalities between the two sides in the platform market, bundling may be profitable without foreclosing the rival when platforms implement cross subsidies from the high-externality side (developers) to the low-externality side (consumers). Bundling has a positive effect on welfare because it allows for better internalization of the indirect network effects and reduces the developer cost of multi-homing, but it also has a negative effect because some consumers consume less-preferred components. Consequently, bundling is socially desirable when platforms are not too differentiated and the vertical differentiation between the complementary goods is high.

Sizing the pool of online users: a dynamic pricing model for online travel agencies

In the modern travel market, online travel agencies (OTAs) compete intensively for online users who are valuable resources that support the OTAs’ long-term development. To expand their pool of online users, a few OTAs use aggressive pricing strategies (e.g., providing extremely low price for newly enlisted customers). However, such approach can create other management issues (e.g., financial burden). Noting that pricing strategies for sizing the pool of online users are less addressed by current literature, this paper considers a dynamic pricing problem in which an OTA actively optimizes entrance prices for newly enlisted customers to encourage them to join the pool. The essence of this problem is how to achieve an adequately sized pool supporting long-term profit through dynamic pricing. By analysing this problem, several findings on the interplay between price choosing and pool sizing are obtained. First, we proved the monotonicity of the optimal entrance price relative to the pool size, which demonstrates the positive effect of pool size on pricing decisions. Second, we showed that the optimal entrance price would be lower than operational cost, resulting in negative profits from newly enlisted customers when the pool size is smaller than a breakeven point. Third, we characterised the steady-state pool size and revealed the eventual convergence of the pool size and the pricing decisions. This result implies that the OTA has two pricing strategies, namely, penetration and constant.

Switching Behavior in Response to Re-Entry of Uber and Lyft: A Revealed Study in Austin, TX

In May 2016, Uber and Lyft suspended services following the defeat of Proposition 1 in Austin, TX. In May 2017, they relaunched service after Proposition 1 was overridden. This paper describes a pilot study aimed at predicting whether those who are using services from other transportation network companies (TNCs) will switch their choice to either Uber or Lyft. At the time of writing this article, Uber and Lyft are trying to increase their market share using an aggressive pricing strategy, thus a survey at this stage will not reflect people’s stable mode choice. Instead, we use survey data collected between November 2016 and December 2016 when Uber and Lyft’s service were still suspended. That survey was primarily designed to understand the impact of service suspension on travel behavior. However, it included several relevant questions asking about users’ trip costs before and after the suspension, whether they were satisfied with the current TNC service, and whether they were inconvenienced by the lack of Uber or Lyft. Inferring from these surrogate responses, we are able to make reasonable assumptions about who will switch back to Uber or Lyft and who will not once they resume service. We hypothesize that people will not switch unless a given trip’s cost saving is beyond a positive threshold due to boundedly rational behavior. Based on this hypothesis, we use probit regression to estimate a parameter describing the degree to which people are willing to switch, termed “indifference band”. Among others, the study revealed that the cohort of younger riders, people who experience higher trip cost saving, or individuals who are extremely inconvenienced by the service suspension, or those who use TNC for social purposes, have lower indifference bands and are thus more likely to switch to Uber or Lyft. The results of this study will assist policy-makers in understanding the impact of policy and regulations on people’s mode choice behavior.

Credit Ratings and Government Spending

This paper examines how the spending of the public sector is influenced by a certification from the private sector – that is, how the federal government responds to a change in supplier firms’ credit ratings in the process of government procurement. The government significantly increases the spending on firms that receive positive rating certification, and lowers the spending on firms that receive negative certification. This effect is more pronounced in industries that are heavily dependent on government spending, and is concentrated on firms close to the investment-speculative grade threshold. In contrast, firms’ non-government customers do not exhibit a similar response. Positive rating certification appears to enable firms to adopt more aggressive pricing strategies and collect a premium from government customers. These findings highlight a significant impact of credit rating certification on government spending, and potentially, on taxpayers’ wealth.

Should I go by bus? The liberalization of the long-distance bus industry in France

The opening up of the French long-distance bus industry is one of the outcomes of the Loi Macron. In this study, we build a unique data set of several representative bus routes and show that the effects of the liberalization have been encouraging in terms of fares, new entry, higher frequency, and higher quality. First, with regard to international routes that used to be under cabotage, we find that relaxing quantitative restrictions has led to the expected results on the Lyon–Torino and Paris–London routes. Second, with regard to domestic routes newly created from the Loi Macron, mostly all procompetitive expected variations in the variables have been observed, except for fares. Indeed, we show that bus operators used an initial aggressive pricing strategy to induce demand for the new services and then increased fares once customers became accustomed with the service.

Evolutionary location and pricing strategies for service merchants in competitive O2O markets

Attracting customers in the online-to-offline (O2O) business is increasingly difficult as more competitors are entering the O2O market. To create and maintain sustainable competitive advantage in crowded O2O markets requires optimizing the joint pricing-location decision and understanding customers’ behaviours. To investigate the evolutionary location and pricing behaviors of service merchants, this paper proposes an agent-based competitive O2O model in which the service merchants are modeled as profit-maximizing agents and customers as utility-maximizing agents that are connected by social networks through which they can share their service experiences by word of mouth (WOM). It is observed that the service merchant should standardize its service management to offer a stable expectation to customers if their WOM can be ignored. On the other hand, when facing more socialized customers, firms with variable service quality should adopt aggressive pricing and location strategies. Although customers’ social learning facilitates the diversity of services in O2O markets, their online herd behaviors would lead to unpredictable offline demand variations, which consequently pose performance risk to the service merchants.

Get Rich Quick With Old Generic Drugs! The Pyrimethamine Pricing Scandal.

Get Rich Quick With Old Generic Drugs! The Pyrimethamine Pricing Scandal.

Market introduction strategies for alternative powertrains in long-range passenger cars under competition

Alternative powertrains are considered as a promising option to significantly reduce CO2 emissions from passenger cars. One major prerequisite is their successful market introduction. In this paper, we present a system dynamics model that allows for the evaluation of strategies for the market introduction of alternative powertrain technologies in long-range passenger cars (⩾400km) under competition. The model considers two competing manufacturers, one first-mover and one follower, each introducing plug-in hybrids and fuel cell electric vehicles according to exogenously defined strategies, which comprise timing, pricing, and technology parameters. The manufacturers can learn from each other due to technology spillover, leading to cost reductions of the powertrains. We use an exemplary dataset for the German car market to study the manufacturers’ influence on the market success of alternative powertrains as well as the underlying mechanisms. The results indicate that in general more competition leads to higher market shares of alternatively powered vehicles and thus allows for a higher reduction of emissions. However, this might cause decreasing profits for both manufacturers, especially if the follower pursues an aggressive pricing strategy when entering the market to gain market shares from its competitor. Also, technology spillover has a positive effect on the market penetration. This particularly holds true for a low level of technology experience where high cost reductions can be achieved and for fuel cell electric vehicles where the costs of the powertrain are much higher compared to plug-in hybrids.

Niche marketing and farm diversification processes: Insights from New Zealand and Canada

AbstractIn many developed countries agriculture is undergoing significant changes. Traditional commodity markets are increasingly being supplemented or even displaced by niche markets served by firms producing specialty products. The purpose of this paper is to determine why firms seek out niche markets and what contributes to their success. This paper investigates the characteristics that make niche markets attractive to small and medium-sized agricultural firms and the ways in which these firms become highly adapted for their chosen niche. Results indicate that forming alliances and the development of horizontal and vertical networks are among the most common and most important strategies employed by successful niche marketers. The study found that firms market niche products as part of a portfolio of products that often includes an anchoring commodity. Results also suggest that aggressive growth and pricing strategies may negatively impact a firm's ability to sustain barriers to entry. The development of a niche positioning strategy is often the outcome of a reaction to an existing situation rather than of a priori strategic planning.