The first thing that the Coca-Cola company must do is select the pricing objective they believe will be most effective in distributing their brand to consumers. Coca-Cola use market-skimming pricing to do this. They use marketing-skimming as there is a sufficient number of buyers that have a high current demand, the unit costs of producing a small volume are not so high that they cancel the advantage of charging what the traffic will bear, the high initial price does not attract more competitors to the market and the high price communicates the image of a superior product. Coca-Cola aims to be the product-quality leader in the market, its nearest competitor being Pepsi.
The price of Coca-Cola is quite inelastic to demand as there is a large degree of consumer sovereignty towards the product. However, there are many competitors in the market so a large increase or decrease in price will have an affect, but not a huge one. Coca-Cola is seen as a “market leader” so an slig
Coca-Cola analyses its main competitor’s costs, prices and offers, that being Pepsi. Often you will see Coca-Cola and Pepsi using similar commercials, often with celebrities to promote their product. In terms of cost, Coca-Cola and Pepsi are both fairly evenly priced in the market, Coca-Cola often just a little bit more due to its popularity and the assumption that it has more quality and prestige. Often we see that when Coca-Cola are having a competition to win a trip overseas, for example, Pepsi will be holding a similar competition. This is all in order to sell more of their product.
Coca-Cola often uses going-rate pricing to some extent. The firm bases its price on competitor’s prices but then often raises the price slightly as again, it is seen as a product with a higher quality than its competitors. Smaller firms such as LA Ice or Schweppes will tend to “follow the leader”, (the leader being Coca-Cola), and change their prices when Coca-Cola’s prices change,
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