Summary
Pricing of products and services is an essential exercise in any business venture. Any business that wants to succeed has to take pricing seriously, and Sally Beauty Holdings is not an exception. The company has to consider various factors in setting the prices, which require different pricing methods that apply distinct steps.
Steps in Pricing
The first step presupposes a proper analysis of all the costs that are incurred in the process of making the product or service available for sale before it is made. Step two involves research on all external and internal factors that are likely to affect the price (Sally Beauty Holdings, 2014). The final step is developing a markup for obtaining a profit to be added on the cost depending on external factors to arrive at the selling price (Microsoft Dynamics, 2014, para. 3).
Analysis of the Step Two in Pricing
One of the most menacing issues about the current state of the Sally Company is that even the second step of setting the price, i.e., the analysis of key factors affecting the sales, is very tricky to carry out. Seeing how Ulta clearly has better channels of retail, as well as better ties with the suppliers and a more efficient information management system, it is highly likely that Ulta will acquire some of the data concerning suppliers, distribution channels, etc. faster and use it to its advantage, while Sally will be left helpless.
At present, Sally has to deal with a very rough competition. True, a number of companies initiate price cuts following the example set by competitors; however, in Sally’s case, cutting prices too low is fatal. The Ulta Company is more successful in promoting to the potential customers. Meanwhile, Sally, its business already getting out of hand, lowers the price for its production to the point where it becomes dangerous.
If Ulta is more successful at information management than Sally and people buy Ulta’s products instead of Sally’s ones despite the latter’s despicably low prices, the Sally Company will clearly take huge losses.
More to the point, Sally may fail to recover from the potential damage with such a powerful competitor as Ulta by its side. Maintaining average prices and conjuring a stellar promotion campaign is the best strategy for Sally at present. With such a strategy, the implications will be neutral (e.g., gaining the same sales income as Ulta) at worst.
Factors Considered
Competing entities set low prices on related goods; thus, to ensure that Sally Holdings sells its products, it will also have to lower its prices (Sally Beauty Holdings, 2014). The major aim of Sally Holdings is to make profits and gain a good market share so as to ensure that the firm will enter the market. Thus, the company should sale at prices lower than those of the competitors (Ulta and others).
Advertisements are necessary to enhance the penetration process, and after gaining a good promotion campaign, it will be possible for Sally to gain an impressive market share. The given goal can be achieved by raising the prices of the commodities by reasonable values. Furthermore, to ensure that the customers remain loyal, Sally should rebrand the products or improve their quality after raising the prices.
Demand, supply and the income levels of customers are other factors that have to be considered in the price setting process. From what the laws of demand and supply say, the two factors determine the price of a commodity considerably. Sally Beauty Holdings has to consider the level of demand and supply in the market well before setting the price.
Multistep External and Internal Factors
Both external and internal factors have to be considered in the pricing process (Microsoft Dynamics, 2014, para 4). Some of the internal factors to be considered include operating costs, targets of the organization and budgets. External factors, such as competitors, market price, demand and supply, also have to be considered in the pricing process. Thus, the Sally Beauty Company should carry out a massive research on these factors before establishing the price for its commodities.
References
Microsoft Dynamics. (2014). Web.
Sally Beauty Holdings. (2014). Web.