Price Strategie of Ford Fusion Hybrid - Research Paper Example

Ford Fusion Hybrid Table of Contents  -Pricing flexibility 2  -Price strategies over the product life cycle 2  -Factors that affect the sensitivity of the product’s pricing 3 Psychological Pricing 4 References 5 Bibliography 6  -Pricing objectives It has been noted that organizations charge price with the purpose of meeting certain objectives. One of the major objectives of pricing is to increase profit. However, prices are also set for increasing the sales and changing the brand image of the organization. Any decision regarding pricing depends on the type of the product, present situation of the market, present internal situation of the company, competition in the market and the overall objective of the organization. As far as Ford Fusion Hybrid is concerned, it is a car that is known for its fuel-efficiency. Ford has launched this hybrid car keeping in mind the continual rise in price of gas and the overtly health conscious that global society has become. This situation is ideal since people are looking for such hybrid cars and car makers are ready to grab the opportunity to improve their financial health. Toyota has already launched a few hybrid cars and has captured a majority portion of the market. Ford, as a result has to keep the price of its hybrid fusion in such a way that it can meet its objectives. It is found that the price of Ford hybrid Fusion is set at just over $27000 which is almost $3000 more than its Toyota counterpart (Prius) (Anonymous, 2009). Hence, it can be said that the main objective of such pricing is to gain as much profit as possible; in other words this pricing strategy of Ford is profit oriented.  -Pricing flexibility Flexibility is an important element in the overall pricing strategy. Flexibility is provided in terms of discounts, customization and negotiation. Like any other cars of Ford, customer can place their customized order on the company’s website. Prices are set on the basis of specifications of the customers. Discounts are given to promote the car to some special customers. However rebates or discounts vary with region. Consumers have little power to negotiate regarding the price of the product. Only customers i.e. dealers have the power to bargain with the manufacturer.  -Price strategies over the product life cycle Pricing strategies vary with the different stages in the product life cycle. Usually there are four different stages in the life cycle of a product. These are introduction, growth, maturity and decline. Ford Hybrid Fusion is at its growth stage where its demand is found to be increasing continuously as consumers are looking for more and more fuel efficient car. In other words, sales growth is rapid at this stage (Hofstrand, D. 2007). Generally in the growth phase, prices of the product are kept high with the objective of gaining as much revenue as possible. Ford is also practicing the same strategy as it is keeping the price of Ford Fusion a little higher than that of its competitors’ products. Like any other products that are in their growth stage, Ford Fusion is also experiencing high demand in the major car markets like US and UK. Prices of the later stages of the life cycle will depend on the demand of the car. In the maturity stage, the demand of the product is expected to come down. In order to cope up with the lowered demand, the company might have to reduce the price of its hybrid model.  -Factors that affect the sensitivity of the product’s pricing There are several factors that are likely to affect the sensitivity of the price of the product. Such factors include economy, substitutes, environment etc. Economic environment is one of the most important among them. The present global economic climate is adversely affected by financial crisis. Car manufacturing companies like Ford have been bearing the brunt of this financial turmoil and they are struggling to make profit for the last two years. Ford has been no exception to it and the company’s financial health is in a pathetic state. However it is found to be recovering fast. Ford has made a profit of almost $2.1 billion in the first quarter of 2010 (Chambers, N. 2010). The company has launched its hybrid version with the objective of improving profitability so that it can repay its huge debt of 34.3 billion dollar (Auto Trends, n.d.). Another important economic factor that has great impact on the pricing strategy of Ford is the price of fuel. Sharp increase in the price of gas has led to the increase in the demand of hybrid cars which are more fuel-efficient. Ford, being one of giants in automobile industry has to come up with a hybrid model in order to stay ahead of the competitors, to take maximum advantage of the high demand of the hybrid cars and to improve its financial figures. In addition to these economic factors there is other important factor that has a great influence on the pricing decision of the company. This factor is environment. Over the past few years, global society has become very much conscious about global warming and various other forms of environment pollution. Today, increased number of people wants to use environment friendly products and services. Researchers have revealed that this number is on an increase throughout the world. Quite obviously car manufacturers like Ford are focusing on hybrid cars that are meant to target these people. However, hybrid car alone is not enough. In order to draw customers the prices should also be kept within the reach of these environment friendly people. Price cannot be too high as these people do not belong to the upper class of the society. Psychological Pricing This pricing technique is used with the purpose of meeting the perceptions or expectations of the customers. In case of the pricing strategy of Ford Hybrid Fusion, consumers’ perception is certainly kept in mind. Consumers always perceive that a hybrid car will be highly fuel-efficient and if that fuel-efficient version is manufactured by a giant like Ford, the price will automatically be little higher than the market average level. In case of Ford Fusion, prestige pricing technique is used as the brand ‘Ford’ is considered to be one of the most respected automobile brands. As a result it is expected that users of Ford Hybrid will enhance the social status of the consumers and in return the company will charge little higher price. Currently Ford Hybrid Fusion is available at $27000 which is significantly higher than its Toyota counterpart. References Anonymous, 2009, Hybrid Fusion vs Prius At A Glance, Hybrid Cars, Retrieved June 18, 2010 From http://www.hybrid-cars.org/fusion/prius-vs-hybrid-fusion Auto Trends, No Date. Ford Swings To Big 2009 Profit, Retrieved June 18, 2010 From http://www.autotrends.org/ford-swings-to-big-2009-profit/ Chambers, N. 2010. Ford Fusion Hybrid Garners Another Win, But is it Bad Journalism?, Gas2.0, Retrieved June 18, 2010 From http://gas2.org/2010/04/27/ford-fusion-hybrid-garners-another-win-but-is-it-bad-journalism/ Hofstrand, D. 2007, Product Life Cycle, Agricultural Marketing Resource Center, Retrieved June 18, 2010 From http://www.agmrc.org/business_development/getting_prepared/business_and_economic_concepts_and_principles/product_life_cycle.cfm Bibliography Bailey, D. 2010. Ford offers fix for Fusion hybrid brake glitch, AlertNet, Retrieved June 18, 2010 From http://www.alertnet.org/thenews/newsdesk/N0497845.htm Read More