McDonalds Pricing Strategy Management Essay

Pricing Strategy Management

McDonald's uses a mix of price bundling and psychological pricing to remain attractive to the customers. The price bundling strategy involves combining different products into one package, which is sold at an offer. Psychological pricing focuses on the human brain, and through the use of prices such as $99.99 instead of $100, the customer feels the product is cheaper. Price bundling aims to persuade customers to shop more, and the slogan is" buying more saves more" (Smith, 2016).

Bundle pricing may package several similar products into one product or an attachment of complementary products. Having a combination of products at a reduced price is usually a good deal for a customer willing to spend more at a cheaper cost. Psychological pricing is very common at McDonald's, and through the use of the "9-digit effect," customers get attracted to products, and they are convinced the prices are low. Prices may differ in different geographical locations. Price is picked based on various factors such as demand and market, and depending on the situation on the market; it is critical to set a reasonable price (Decker, n.d; Kolmakova, 2017). Pricing differs in different countries should be selected based on the current economic state, and it should appear to favor the customer

 Here is the procedure followed in setting a product price:

· Identifying the price objective

· Check product demand

· Approximate the costs

· Identify major competitors and their prices and offers

· Pick a pricing method

· Determine the final price

McDonald's uses the above model to determine the best prices for older and new products (Smith, 2016).

Incremental cost refers to the additional cost incurred as a result of producing an extra unit. Differential cost becomes necessary when companies have two options, and they are required to determine the products that can return more profit. It is calculated by acquiring the difference amid the two possible options. Companies use…

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…Determining customer price sensitivity through numerical estimates can help pick the best price for a product. Price sensitivity shows the buyers' motivation to continue using a specific product. High motivation is an indication that the demand is high, and producing more product would translate to more profit. Low motivation is a challenge to improve product quality or lower prices to ensure the product attracts customers. Producing a product or a service that customers are not interested in will cause a loss to the company (Abdullah-Al-Mamun & Robel, 2014).

Making pricing decisions is a challenging process, and accuracy and research are needed. Prices describe a lot about a company, including the level of ethics. If customers discover that a price is not fair, they always find an alternative. There should be a balance between price and quality, but hiking prices without reason or to make more profit will always hurt the brand. However, it is critical to note that it is to raise prices if it makes customers…