SHAMPOO PRICING STRATEGY DEVELOPMENT 1

Shampoo Pricing Strategy Development

Student’s Name

Institutional Affiliation
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Shampoo Pricing Strategy Development

Pricing is a critical component of any marketing strategy, directly influencing a product's

market position, customer perception, and profitability. An effective pricing strategy represents

the overall approach to adjust the price to both compete for the target market share and to

generate the required level of profits. Marketers use pricing analysis to study the market and the

customers in order to determine the right price to charge for their products. The discussion is

appropriately applied to Herbal Essences, which is a leading shampoo brand that targets

consumers who prefer natural shampoos and quality products. To increase its competitiveness in

the market and increase sales while also making customers happy, Herbal Essences needs to

improve its pricing tactic.

Product's Current Pricing Structure and Target Market

Herbal Essences has a moderate line price strategy and the cost of the shampoos falls in

$5 to $8 for a 13.5 oz bottle. In general, this pricing strategy is oriented both to availability and

to value, making the products affordable for a wide customer base but still maintaining high

perceived value and effectiveness. In other words, Herbal Essences is strategically positioned to

compete directly with these mass-market brands and other premium brands, addressing a desire

in consumers for quality hair products that are not only affordable but also highly efficacious.

Herbal Essences especially markets to ladies within the age of 18-45 years, but products

from Herbs can also be used by men and individuals above 45 years. The brand is aiming at the

health and environmentally sensitive target market, which would prefer organic products when it

comes to body care (Herbal Essences, n.d.). These customers have particular needs for the kind

of treatment their hair requires such as moisturizing, enhancing body, and protecting hair color,

as well as the attitude of the company towards the environment and society. Achieving the goal
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of targeting babblers, Herbal Essences consequently maintains a strong customer base that is

conscious about the quality of products they use, and the responsibly intake of alcohol.

Legal and Ethical Constraints

In the pricing strategies, there are several legal and ethical factors that Herbal Essences

need to consider for it not to violate the law and lose the trust of its consumers. Another key

factor here is the aspects of fair pricing laws since the brand cannot overcharge for some

products, particularly the basic ones such as shampoo. It is crucial to adhere to these

requirements to avoid legal consequences and demonstrate that businesses follow acceptable

standards (Arnold et al., 2019). Furthermore, the codes of advertise Herbal Essences is

prohibited from stating untruths or half-truths regarding the effectiveness or uniqueness of the

advertised products. Real and truthful advertising do not only meet legal provisions but also

foster long-term consumer relations.

Ethical pricing considerations add one more point to the need for proper and fair pricing

approaches in Herbal Essences company. Prices should be justified and general information

about changes in prices should be clearly stated and there must be facts backing the changes such

as a rise in the prices of ingredients or enhancing the formulation of the brand. This also keeps

the confidence of the consumer, because customers will not be resistant to changes in prices, if

there are reasons for such changes (Rendtorff, 2019). With the application of the following legal

and ethical considerations, Herbal Essences will be in a position to set a good channel of pricing

strategies that consumers will find useful and acceptable hence improving the brand’s reputation

and sustainability.

New Pricing Strategy: Value-Based Pricing

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In considering various pricing strategies for Herbal Essences, several alternatives were

evaluated before settling on value-based pricing. One such strategy is cost-based pricing, which

involves setting prices based on production costs plus a fixed profit margin. While this method

ensures that all costs are covered and a consistent profit is achieved, it does not take into account

the perceived value of the product to the customer (Amaral & Guerreiro, 2019). As a result, cost-

based pricing may lead to prices that are either too high or too low relative to customer

expectations and competitive offerings, potentially limiting market competitiveness and

profitability.

Another option is penetration pricing, where prices are initially set low to attract

customers and gain market share quickly. This strategy can be effective for new brands entering

a competitive market, but it is not suitable for Herbal Essences, which is already well-

established. Using penetration pricing could devalue the brand and result in unsustainable long-

term profits. Skimming pricing, on the other hand, sets high prices initially and gradually lowers

them (Gonçalves, 2022). This approach is typically used for new, innovative products and may

not align with Herbal Essences' established market presence and customer base. Lastly, premium

pricing sets high prices to create an image of exclusivity and superior quality. While Herbal

Essences offers high-quality products, adopting a premium pricing strategy could limit its

customer base to a smaller, more affluent segment, conflicting with its current mid-range market

positioning (Lopez, 2020). For these reasons, value-based pricing, which aligns prices with

customer perceptions of value, is the most appropriate strategy for Herbal Essences.

Why Value-Based Pricing?

Value-based pricing is appropriate for Herbal Essences because this brand is associated

with quality and has many loyal customers. The brand has been able to attract a loyal customer
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base that appreciates the use of natural ingredients in the production of the products. These are

customers who are ready to spend more money on goods that fit their health and eco-friendly

conscience. In this way, Herbal Essences can make its prices which are aligned with the actual

value that customers assign to the products, not the actual cost of the manufacturing or the actual

prices of the competitors.

Furthermore, the use of the value-based price strategy helps the Herbal Essences to have

a competitive advantage in the heavily sealed market. Thus, the brand can easily explain the

higher prices through the demonstrable advantage of the hair care formulas, company’s

sustainability goals, and environmentally friendly packaging. Apart from emphasizing on the

utilitarian aspects of the products, it also strengthens the position of the brand as an innovator in

environmentally conscious and efficient hair care solutions (Jommi et al., 2020). Further, the

value-based pricing allows for the development of superior tiered products for consumers willing

to pay the higher price for a greater formulation and better ingredients while sticking with the

regular prices for genuine products. This allows Herbal Essences to reap more sales revenue and

profitability in various segments of its product portfolio.

Implementation Steps

The first key activity in the first strategic area is to conduct market research in order to

prepare for the implementation of value-based pricing for Herbal Essences. They need to survey

the customers, arrange focus-groups, and assess customer feedbacks which will inform them

regarding the attributes of the shampoo that is most important to them. This knowledge of

detailed customer’s preferences, their propensity to purchase, and how much they are willing to

pay will ensure the right pricing strategy is adopted. Further, demographic and psychographic
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analysis of the target market might help categorize the perceived value of the Herbal Essences

products by the target customers.

Secondly, it is important to define the strengths and weaknesses of the key competitors.

This is a process that requires a comparison of competitor’s pricing initiatives and evaluating

their product’s perceived value by clients. Analyzing how competitors brand their products and

what approaches they use in pricing, Herbal Essences can easily identify areas of niche that have

not been fully exploited. This assessment will also identify gaps for differentiation such as

through providing other functionalities and engaging in ecofriendly packaging so as to compete

and warrant appropriate premium pricing suitable for the brand.

Lastly, communication and constant surveillance play a critical role in the

implementation of new pricing strategy. That’s why Herbal Essences has to focus on the

specifics and demonstrate the company’s worth, regarding such aspects as natural materials,

environmental conservation, and hair treatment features. To support this message, a series of

targeted marketing communications should be employed to remind consumers of the benefits of

the respective brand. Furthermore, the brand must constantly observe the market response to the

source, soliciting feedback on the brand from consumers and tracking sales numbers to judge the

impact of the price mechanism (Ihoeghian et al., 2021). From this perspective and given the

changes in the competition, Herbal Essences should be ready to increase or decrease the price

depending on the performance which is an essential driver for increasing its overall profitability.

Conclusion

Adopting a value-based pricing formula for Herbal Essences relates the prices of the

organization’s products with the perceived value of its quality natural ingredient offerings. This

approach is based on the fact that the brand enjoys a positive reputation and customer loyalty;
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therefore, high price tags can be set for specific lines, while maintaining the relatively affordable

prices for regular products. The results of this analysis lead to the conclusion that Herbal

Essences can and should differentiate itself in this context due to focused and efficiently

delivered unique value propositions. The anticipated benefits of this strategy are; increased

revenue, growth and dominance in the market, and customers satisfaction. In the long run, the

concept of value-based pricing will help Herbal Essences to remain competitive by offering its

consumers best products with reference to their values.

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References

Amaral, J. V., & Guerreiro, R. (2019). Factors explaining a cost-based pricing essence. Journal

of Business and Industrial Marketing, 34(8), 1850–1865. [Link]

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Arnold, D., Beauchamp, T., & Bowie, N. (2019). Ethical theory and business.

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Gonçalves, E. (2022). Value-based pricing for advanced therapy medicinal products: emerging

affordability solutions. Springer, 23(2), 155–163. [Link]

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Herbal Essences. (n.d.). Retrieved May 24, 2024, from [Link]

Ihoeghian, N., Technology, E. A.-J. of S. and, & 2021, undefined. (2021). Formulation,

Evaluation, and Comparison of Herbal Shampoo with Marketed Synthetic Shampoos.

[Link], 3(4). [Link]

Jommi, C., Armeni, P., Costa, F., Bertolani, A., Therapeutics, M. O.-C., & 2020, U. (2020).

Implementation of value-based pricing for medicines. Elsevier.

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Lopez, S. (2020). Value-based marketing strategy: pricing and costs for relationship marketing.

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Rendtorff, J. D. (2019). The Concept of Business Legitimacy: Corporate Social Responsibility,

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Corporate Citizenship, Corporate Governance as Essential Elements of Ethical Business

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