Munchys uses the market-penetration pricing as the pricing strategy. This means that Munchys set a low price at initial stage to penetrating the market deeply and quickly to attract much of buyers quickly to increase their market share in the food industry. This strategy has an inverse relationship to production and distribution cost to sale growth. Moreover, this means that the market is a price sensitive market because low initial price can create an expectation of permanently low prices to the customers, it is hard to raise the prices rather than lower the prices. In addition, market penetrating pricing may easily create a long-term customers relationship.
Besides that, Munchy’s has a price-adjustment strategies which is discount, allowance pricing and promotional pricing. The function of discount and allowance pricing is to reduce prices in order to reward customer, they may occur anywhere in the distribution channel. The purposes of discount and allowance are reward customers, move out of date stock, and encourage the member of distribution channel to perform the function, and reward behavior that benefit the discount issuer. Furthermore, the meaning of promotion pricing is when the prices is below list price or cost of the product temporarily or service to increases the demand of customers. For example, special event pricing, cash rebate, low interest financing, longer warrantee, and free maintenance.
Application of theory
The theory of pricing strategy that practice by Munchy’s is Robinson-Patman Act .The aim of this theory to prevent the price discrimination by ensuring that the seller offer the same price to all of the customers. The act indicate that the seller must sell the tangible goods at same price and quality to prevent the large volume of buyers gains more benefit than small volume buyers. Under this act, the price discrimination is allow if the retailer can prove to other people that costs of product are difference when selling the product to different retailers. Besides that, if the seller manufactures different qualities of the same product for different retailers, the price discrimination will be able to be approved. The economist believe that the price discriminate cannot lead the monopoly power and great injury to competitor because the profit generated by price discrimination are not enough and has no power to kick out the competitor. There are fewer and fewer business follow the Robinson-Patman Act because the act is complex that the plaintiffs always resort to antitrust statute and the competition defense become more effective because the product has increased in sophistication. Even now, the Robinson-Patman Act still is an antitrust statute. The act is to prevent the large business abuse the market power and also protect the small business from national competitors.
Self -analysis and reasoning /explaination
Munchy is well-known brand in the Malaysia because of their variety of food choice. Their popular products are biscuits, wafers and wafer sticks. The Munchy’s always improve their product quality continuously to satisfy the diversity of customer. The example of product are captain munch, oat krunch, cream cracker, lexus, music, nom-nom and etc. The pricing strategy that used by Munchy’s is market-penetrating pricing rather than price skimming strategic because which bring a lot of benefit .By practice this pricing strategy, the new product will enter into the market more easily. But, there are easier to reduce price rather than raise the price because of the mind set of customer with initial low price.
Munchy choose the discount and allowance pricing and promotional pricing as price-adjustment strategies because these two flexible strategies can improve the product recognition and also make them more famous. The discount and allowance pricing is given to the customers as a reward of their support and the most important is Munchy’s can establish a long term relationship by using this strategy to ensure that the customers will come back again with a well-known of the products. In addition, the promotional pricing is given a lower price compare to usual price intended to increase the customer demand quickly. This action will only occur on specific period of time and got an expired date. After the promotion, Munchy will raise back the normal selling prices. This method can clear the accumulated out- of -date stock and also clear the product which was no market value already. For example, like seasoning product such as clothing, sporting goods, and holiday specific items.
As conclusion, Munchy is a respective company because they are obey to the restriction rule from Robinson-Patman Act, which is a body to prevent the unfair price discrimination by ensure that the seller or retailer offered the same price to all customers at a given level of trade.