Lowering the selling price of a product has always been an effective marketing strategy to drive demand, there is no doubt about that.
By lowering the marketing prices of their products, companies can make their items more affordable to a broader range of customers, which generates more revenue and turnover, key information for the health of companies.
In recent years, the use of this strategy had become more prevalent due to increasing competition in various industries. According to data from hubspotin the United States in 2021 60 percent of companies reported that they had used some pricing strategy as a strategy to drive demand.
An example was Apple, in 2020, when the price of iPhone SE It was reduced by 50 dollars with the idea of generating sales in a group of people for whom the phones of the Cupertino brand were impossible to buy.
According to Apple, that marketing strategy resulted in an increase in demand for the iPhone SE of 33 percent in the second three months of that year.
something similar did Amazon in 2018 with the price of its Prime membership for low-income customers. And, in 2023, is what he did Netflix with the price of their plans in some countries.
The problem with this kind of strategies: cannot be sustained over time if income is not enough to cover costs when inflation hits the value of raw materials.
Tesla and low prices
The novelty in this regard this Tuesday, March 7, comes from Tesla, company that decided to reduce the sale price of two of its most expensive models, the Model S and the Model X.
It is a new cut, which is added to those that had already been applied in 2022, he says Wall Street Journal.
In effect, Tesla cut the base price of its Model S luxury sedan from $94,900 to $89,900, representing a cut of about 5 percent.
Tesla also lowered the retail value of its Model X sport utility vehicle from $109,900 to $99,900, a decrease of about 9 percent.
Between the two models, they will make up about 5 percent of Tesla’s total vehicle production in 2022.
As of early 2023, Tesla had lowered the price of its two best-selling cars: the Model Y was down 20 percent and the Model 3 was down 14 percent.
There are several confluent reasons for Tesla to carry out this strategy of lowering prices. On the one hand, to pressure their competition to do the same, reducing the profit margins of their rivals.
On the other hand, to reinvigorate their own demand. And finally, to allow some buyers to qualify for a $7,500 tax credit from the United States government.
Tesla is pushing to stay ahead of the competition with plans to ramp production to 20 million vehicles a year by 2030.
In 2022, it produced 1.3 million.
The company said last week that it plans to open a new auto production plant in Mexico.
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