Pricing Strategies at Walt Disney Assignment Help

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Walt Disney: Pricing Strategies

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WALT DISNEY PRICING STRATEGIES 2

Walt Disney’s Pricing Strategies

Various factors influence the five pricing strategies: premium pricing, penetration pricing,

economy pricing, psychological pricing, and promotional pricing.

Four key factors might influence the selection of the premium strategy. First, if the

company wants to insinuate high quality. The resultant consumer perception can help elevate or

maintain a premium brand value. Second, if the company intends to market to high-net-worth

individuals belonging to an exclusive group or image as demonstrated at essay help. Third, if the

company seeks to recover investments in the product quickly. Fourth, the company has many

versions of the same product. This fourth factor is the reason why the strategy is grouped under

product-line pricing strategies (Hughes & Kapoor, 2010, p. 466).

Penetration pricing is utilized for new products. Therefore, the main factor influencing

pricing is a new product status. Unlike premium pricing, which is largely influenced by product

line and the company sets high prices to suggest high-quality/luxury, penetration pricing involves

setting low prices to build market share quickly.

The main factor influencing the selection of economy pricing is an objective to sell at the

bare minimum price that returns a profit for the company. The company can sell the product to the

masses due to the low prices. The strategy is similar to penetration pricing due to the low prices,

but unlike penetration pricing, another factor is given extra consideration, namely, setting the price

above the break-even price. Whereas premium pricing is used when the company intends to sell to

high-income groups, economy pricing largely targets the masses to obtain greater profits.

Under psychological pricing, the main factors influencing strategy selection include the

company’s intention to encourage consumers to purchase based on emotional responses rather

than economically rational responses; and when the offerings are consumer products (Hughes &

WALT DISNEY PRICING STRATEGIES 3

Kapoor, 2010, p. 466). Premium pricing is ideal for both business and consumer products, but

psychological pricing, such as setting the price at $4.99 instead of $5 might not evoke emotional

responses for business products as it does for consumer products.

Whereas a luxury brand might emphasize the product in its 4Ps marketing mix, an ordinary

brand that prides in low-cost products might emphasize pricing. The latter company is likely to

adopt a promotional pricing strategy to emphasize its price competitiveness. A company might

also use promotional pricing to launch a new product, combining both penetration pricing by

setting a low price, and promotional pricing by embracing odd pricing and discounts.

Although Disney’s pricing is complex, the company largely employs a premium pricing

strategy. According to Baisya (2013), Disney is a premium brand and sets prices that are

significantly higher than similar products from competitors. Market sentiments show that the

company is nearly pricing out the middle class and recently adopted a dynamic pricing approach

to take into account seasonal changes (Cameron, 2019). The company combines its premium

marketing strategy with other strategies in some cases where it deems appropriate. For instance, in

a bid to even out demand through the year, Disney charges high prices during peak demand and

low promotional prices during periods of low demand. In another example of the company’s

pricing strategy, the launch of Disney Plus, Disney’s streaming service akin to Netflix, offers

important insights. The company adopted a penetration pricing strategy for the launch. Disney set

the launch price at $7 as a monthly subscription compared to Netflix’s $13. This penetration

pricing surprised many, leading some to wonder whether the price was “too cheap for the premium

brand” (Hollis, 2019). The company also uses psychological pricing as it indicates the monthly

subscription fee for Disney Plus as $6.99. Despite the complex pricing, Disney’s approach is

largely a premium pricing strategy as it commands a premium brand.

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Disney, as a premium brand, has positioned itself favorably to charge premium prices for

its products. The company occasionally raises its prices. As indicated above, there are concerns

over whether the company is setting prices that are beyond the reach of the middle class. Despite

such sentiments, the company’s market share is growing and the brand remains successful.

Accordingly, the premium pricing is effective because the company has nurtured a premium brand

backed by high-quality products and an effective marketing strategy. As noted by Santos (2012),

Disney epitomizes the meaning of pricing power. Get any business essay help here. The company,

owing to its brand value, is in a favorable position to charge premium prices and still retain

customers. In this regard, Disney understands brand value and its implications for pricing. By

maintaining a high brand value, the company maintains its strong position to use a premium

pricing strategy.

Another factor that helps the premium pricing strategy is the focus on an exclusive market

niche. The company is in an unrivaled position to influence its market niche. This factor offers

Disney significant leverage to charge premium prices. Disney theme parks, for instance, not only

present a world of fantasy and fun that represent a niche market, but also entice customers to

return. The nurtured strong relationship with consumers gives Disney additional power to charge

high prices.

Disney largely aligns its pricing strategy with the messaging in promotions. While

launching the new streaming service, Disney Plus, the company emphasized the low price in its

“massive marketing campaign” (Sutton, 2019). This penetration pricing strategy has helped the

service to gain a large number of subscriptions in a relatively short period. In line with the

premium pricing strategy, the company emphasizes its brand value and quality of products in the

messaging in promotions. An example is the messaging in promotions for the company’s theme

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parks. One promotion had the message “That’s the power of magic – you can fly”. Another

example is visible in Disney’s slogans that feature prominently in marketing campaigns. One such

slogan is “The happiest place on earth”. This slogan alludes to the value that the Disney brand

gives consumers.

A notable element of Disney’s messaging in its promotions is the tendency to insinuate the

high brand value of the Disney brand. This is perhaps a cautionary measure the company uses to

nurture and maintain its brand value even when adopting pricing strategies that set low prices. The

widely promoted Disney Plus, despite emphasizing the low price, set based on a penetration

pricing strategy, equally emphasized the value of the product. Figure 1 below is an example of a

campaign promoting Disney Plus at the time of its launch and features the tag “Plus up your day”.

This tag emphasizes the value the product offers to consumers.

Figure 1: Source Sutton, 2019

WALT DISNEY PRICING STRATEGIES 6

In line with the promotional pricing strategy, Disney uses messaging in promotions using terms

such as “discounts for the family” and “offer valid for a limited time”. These instances show the

connection between Disney’s pricing strategy and messaging in promotions.

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References

Baisya, R. K. (2013). Branding in a competitive marketplace. SAGE Publications.

Hughes, R. J., & Kapoor, J. R. (2010). William M. Pride. Retrieved from

https://profsonly.com/essay-help/

Santos, P. (2012, June 4). Disney And The Power Of Pricing Power. Retrieved from

https://seekingalpha.com/article/636651-disney-and-the-power-of-pricing-power

Cameron, S., (2019, January 5). Disney World is getting so expensive it’s pricing out the middle

class. Retrieved from https://www.businessinsider.nl/disney-world-expensive-middle-

class-2018-12/

Hollis, N. (2019, April 15). Is Disney Plus too cheap for the premium brand? Retrieved from

http://www.millwardbrown.com/global-navigation/blogs/post/mb-blog/2019/04/15/is-

disney-plus-too-cheap-for-the-premium-brand

Sutton, K. (2019, November 14). Disney+’s Massive Marketing Campaign Is Just Getting Started.

Retrieved from https://www.adweek.com/digital/disney-plus-massive-marketing-

campaign-just-getting-started/