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Gatorade's Pricing Strategy Analysis

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Part D Review of Prices 4.1 Gatorade’s pricing strategy The Sports drinks industry is a monopolistic competitive one where the market structure is characterized by large firms such as Coca Cola and PepsiCo and entry into the market is easy. Sports drinks are similar but each brand has differentiated products in its range from its competitors. Since all sports drink products all have the same purpose, consumers would find it difficult to decide which the best product is for them and this is why the sports drink industry relies heavily on marketing. Gatorade opts to raise the price of its product to suggest premium quality, whilst Powerade opts to have a lower price, sacrificing the profit margin for higher sales (Investopedia, 2017). Since Gatorade was the first company to enter in the sports drinks market, it has the biggest …show more content…

In order for the value of Gatorade to remain as that of a premium product, the future strategy should stay focused on keeping pricing on the high side whilst strengthening relationships with its loyal customers. 4.2 Gatorade supply / demand and price elasticity One of the factors that might change the demand for a product is the prices of related goods. Since Gatorade and Powerade are substitutes of each other, when Gatorade increases its price, according to the law of demand it will fall and fewer products are sold. On the other hand if its competitor which is a similar product keeps the pricing constant, will see an increase in sales, consumers switch to it and hence the demand curve for Powerade will move towards the right. Other factors that can change the demand for Gatorade include change in: • Income levels • Natural factors such as earthquakes and hurricanes • Market size • Taste and

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