Nestle is a Swiss multinational brand that has a current net worth of around $270 billion. Its successful pricing strategy has helped the brand reach this state. Their revenue is constantly growing which shows that the company knows how to place its products in the market. In general, Nestle’s products are more on the pricier side compared to the products of the retailing brand.
Product Price Ranges
Nestle has around 2000 brands under it which consist of a variety of product range. Among them, some of them are the star of the market. Some of the products are globally famous, some, on the other hand, are more familiar in the local market. Nestle’s powder and liquid products are the highest selling products. Nestle’s liquid beverages have a sale of over $2.79 billion. Their liquid items such as Nescafé Original Decaff, Nescafé Gold Decaff, Nescafé Dolce Gusto, etc. are globally famous. Nestle’s powder milk is also renowned and globally sold. Nestle has mostly products for every consumer.
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Pricing Strategies of Nestle
Nestle’s pricing strategy is quite unique than the other brands. It solely depends on recognition which is commonly known as the product’s perceived quality. Perceived quality means that consumers get to touch and feel the quality of the products. Depending on the quality and consumer’s approach towards it, Nestle decides which pricing strategy they want to take.
Affordable Pricing Strategy
Among the 2000 brands, for some Nestle chooses to offer a more affordable price. It entirely depends on their market segment. Now market segment usually consists of the target audience. For example, if Nestle’s target consumers are the mass audience, then they must go for an affordable pricing strategy rather than an expensive one. Which happened in the case of Maggi. It is more on the affordable side, compared to Nestle’s other products. But then again, if you globally compare Maggi’s pricing with other noodles brands, then it is a little expensive. For different regions, Nestle chooses different prices.
Bundle Pricing
Over time Nestle has realized that people don’t do groceries every single day. They prefer buying in bundles. Hence, Nestle has come up with bundle packs. This includes a Maggi pack of 16. At first, Maggi used to come in one single pack. After Nestle has introduced its 16 pack offer, the sales have automatically increased.
Stock Keeping Units
Nestle does not want to let go of any consumers. Hence, Nestle has different prices for each stock-keeping unit. This allows the brand to reach a larger consumer base. For example, starting from Maggi to Cereal, Nestle has it all. It also provides different pack sizes. For instance, Nestle’s cereal is a little expensive than the other brands. Therefore, the brand has come up with mini pouches for day-to-day intakes. These pouches are way cheaper than the bigger pack which allows the consumers to purchase Nestle’s products.
Discounts and Offers
Nestle provides a lot of discounts in retail stores such as Walmart, Costco, Target, etc. You’ll often find 5% off, 10% off in their products. Some of the products come in bundles. For example, you will often see a coffee coming with a creamer. In most cases, they give a few dollars off in these bundles.
Competitive Pricing
Another common approach that Nestle takes is analyzing competitors’ pricing strategies. Nestle has a lot of brands. For each brand, they have designated departments that analyze all the competitor’s pricing strategies. Along with that it also observes competitors’ marketing style, product innovation, sales records, etc. Competitive pricing strategy helps them achieve the desired place as they already get the idea of what the consumers prefer.
Demand
Demand is another important factor when it comes to choosing the pricing strategy of any product. Just like all the other brands, Nestle also looks out for demand at the very beginning. Before even the production of any new good. As it is established that demand and price have an inverse relationship as per the theories of economics. This usually goes in a cycle. So if a demand for a certain product is higher, then its price will also increase. For instance, Nestle’s Cerelac is quite a in demand globally. As a result, the price of their Cerelac is higher than the other products.
On the other hand, when price increases beyond the limit of people’s affordability, the demand automatically decreases. When this happens, Nestle tries to provide discounts and give more lucrative offers to the consumers to keep them captivated.
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Premium Pricing
Nestle often has multiple options in one product line. This is called line pricing. For instance, Nestle has two ranges of coffee. A jar of Nestle’s 7 oz instant coffee is around $7.78. This is on the more affordable side. On the other hand, it also has a premium side called the “Nescafe Gold” which costs around $15.80 for a jar of 7 oz.
Nestle’s Global Pricing Strategy
Globally Nestle tries to follow a pricing strategy that will help them achieve their financial goals. These strategies usually include the penetration strategy and the skimming strategy. When Nestle’s products are exported from one region to another, it’s pricing automatically increases. On the other hand, the company also does price skimming, which means that at the beginning it sets a higher price and eventually it decreases the price depending on the demand of the consumers.
Pricing Strategies Applied by the Competitors
Some of Nestle’s biggest competitors currently in the market are Danone, PepsiCo, Unilever, etc. all of the brands have their own unique strategies. Most of these brands follow the competitive pricing strategy, penetration pricing strategy and skimming pricing strategy. All of these strategies are also preferred by Nestle.
Recommendations
Nestle can go for a more flexible pricing strategy. They can observe and analyze consumer behavior and then decide on a pricing strategy for their products. Instead of sticking to one strict price range, they can be more flexible towards their pricing. Alongside that, they can also give holiday offers and come with innovative holiday editions. These editions can be sold at a higher price which will further attract consumers.
Nishat Tarannum Mridula is a contributing writer at The Strategy Watch. She has been contributing for last two years.
Nishat is currently studying at the University of Dhaka. Even though her major is in Banking, she enjoys writing on diverse topics, starting from appliances to blogposts. She is in the middle of completing her BBA from University of Dhaka. Alongside that, she writes different types of business articles for The Strategy Watch.