Pricing Strategy of Nestle Company

In 2019, Nestle earned half of its worldwide sales in America. It had a cumulative revenue of about 92.6 billion Swiss Francs that year. How was Nestle able to generate that much revenue? What is their pricing strategy? Let’s find out!

Case Study on Nestle

Nestle was founded in Switzerland by Heinrich Nestle in 1866. Nestle is one of the oldest multinational companies. From the early stages, Nestle wanted to take advantage of growth opportunities in different countries. In 1905, it merged with Anglo-Swiss condensed milk, broadening its product range to include infant formulas and condensed milk. Nestle currently has 447 factories, with operations in 189 countries.

In this case study, we will focus on Nestle's pricing strategies. Pricing is the most important element for maximising revenues. According to Harvard studies, if there is a 1% improvement in pricing, it leads to an 11% increase in profits (approx.). If the pricing structure is incorrect, the business loses profit with each transaction made. Therefore, correct pricing is critical.

Nestle is a multinational brand with a present net worth of about $270 billion. The success that the brand has is due to its pricing strategy. The revenue of Nestle is continuously growing, this depicts the successful identification and placement of its products in the market. Generally speaking, Nestle’s products are pricier in comparison to the products of the retailing brand.

Nestle’s pricing strategy is fairly distinctive in contrast with other brands. It merely hinges on recognition which is attributed to the apparent quality of the product. Based on this quality and the attitude of the customers, Nestle assesses the pricing strategy it wants to implement.

Nestle’s pricing strategies

Here are some of the strategies implemented by Nestle in order to achieve its targets and goals.

Nestle Price skimming

Nestle uses price skimming for some of its products when it enters the market of a country.

Inexpensive pricing strategy

Amongst its wide range of brands, Nestle offers a fair price for quite a few of its brands and products. Pricing is based on market segmentation. Market segments generally involve a target audience.

This happened in the case of Nestle's Maggi noodles. It is considered affordable in comparison to other products of Nestle. However, if the price of Maggi is compared globally with other noodle brands, then it can be perceived as a little pricey.

Bundle price strategy

With time Nestle has understood that people do not usually do their groceries every day, instead, they prefer purchasing in bundles. Therefore, Nestle implemented the bundle packs approach.

Penetration pricing strategy

When Nestle introduced a new flavor of Maggi instant noodles, they were sold at a low price of £2.25 to entice new customers. Nestle’s strategy was to lure more customers away from its rivals which offered alike flavors priced at £3.25. Nonetheless, when Nestle gained a greater customer base they increased the price to £3.

Psychological pricing strategy

Nestle Aero bliss was sold for £8.99 instead of £9. This pricing strategy will have a positive psychological impact on the consumer and will encourage them to purchase the product.

Stock keeping units

Nestle does not want to lose any customers, so it has diverse pricing for every stock-keeping unit, allowing it to reach a bigger consumer base. From Maggi noodles to Cereals, Nestle has it all covered, whereby the company offers different sizes of packs.

Discounts offered

Nestle offers discounts in various retail stores. Nestle products are often bundled and come with a 5% or 10% discount.

Competitive pricing strategy

Another general approach that Nestle follows is analyzing the pricing strategies of its rivals. Nestle has several brands and for every brand, it has separate departments that assess the pricing strategies of its rivals. Besides that, it examines the marketing style, sales, and innovation of rivals. The competitive pricing strategy assists in achieving Nestle's desired position as they acknowledge the preferences of the consumers.

Global pricing strategies of Nestle

Globally, Nestle attempts to ensure the pricing strategies that will assist it in achieving its financial objectives. These strategies typically involve the penetration and skimming strategy. The price of Nestle products automatically rises when they are exported to other regions. Alternatively, it also implements price skimming, as it sets a higher price at the start and then ultimately reduces the price based on the customer demand.

Over the years, Nestle has become one of the leading parent brands with successful divisions under its name. What has made Nestle successful with consumers is that it adapts to different pricing strategies according to the regions its selling and according to the product offered. It gives preference to the demands of its customers and tries to provide the best quality products at different price ranges so that all segments of consumers are able to afford its products, hence, increasing the sales and profits for the company.

Sources:

Howandwhat, https://howandwhat.net/marketing-mix-nestle/

The Strategy Watch, https://www.thestrategywatch.com/pricing-strategy-nestle/

Price intelligently, https://www.priceintelligently.com/blog/bid/182007/6-must-read-pricing-strategy-quotes

StuDocu, https://www.studocu.com/my/document/tunku-abdul-rahman-university-college/pricing strategy/bbdt3193-pricing-strategy-for-the-company-nestle/18242524

Studymode, https://www.studymode.com/essays/Nestle-Pricing-Strategy-1058790.html

Iide, https://iide.co/case-studies/nestle-marketing-strategy/

Iide, https://iide.co/case-studies/marketing-mix-of-nestle/

Howandwhat, https://howandwhat.net/marketing-mix-nestle/