Analyzing Pricing Strategies in the Korean Fashion Industry

This literature review delves into the various pricing strategies employed within the Korean fashion industry, examining their impact on marketing and competitive advantage. It discusses the importance of aligning pricing decisions with product design, promotion, and distribution to achieve organizational objectives. The review covers different pricing tactics such as market skimming, market penetration, product line pricing, and segmented pricing, including budget and luxury pricing approaches. Internal factors like company strategy, target market, brand positioning, and cost considerations (fixed vs. variable) are analyzed alongside external factors like market demand and competition. The review highlights how these elements collectively influence pricing decisions and ultimately affect a company's profitability and market standing in the dynamic Korean fashion landscape.

Running head: PRICING
Pricing in Fashion Industry in Korea
Name of the Student
Name of the University
Author Note

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Literature review
Marketing mix strategy
One of the important tools that is present in the marketing mix is the use of price that
helps the fashion companies in achieving the objectives that they have set within the
organization. The decision of pricing needs to be coordinated with that of the design of the
products along with the promotion and distribution of the products. This will help the company
in being effective and consistent in the competitive market so that they can gain an advantage
through the [products that are being sold in the market (Macchion et al. 2015). The decisions that
are taken up for the different variables that are present in the marketing mix help in establishing
the price of the product as well. Most of the fashion companies use resellers for promoting and
supporting their products so that it can result in attracting the customers. This results in
increasing the price of the products that are being sold in the market. Most of the companies take
the decision of pricing the products at the first instance so that the other variables present in the
marketing mix can be used in a strategical manner (De Felice and Petrillo 2013). It also
influences the positioning of the product in the market along with the design that needs to be
supplied in the market, which would result in gaining a competitive advantage by the firm. Most
of the companies in the fashion industry uses a technique commonly referred as target costing,
which enables them in designing the product first and then setting up the cost at which it would
be sold in the market (Shen et al. 2013).
Therefore, it is important for the fashion industries to consider in setting up the prices in a
priority manner so that it can help them in achieving the other variables present in the marketing

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mix. The factor of pricing the products will help the companies in deciding their positioning
value so that they can try to earn a profit in the market (Leug, Pedersen and Clemmensen 2015).
Fashion Marketing
It is the change that takes place within a shorter period with respect to the clothing of the
customers. The main factor that helps in making the changes in the fashion industry is
seasonality, as customers will try to change their apparels with the changes that are taking place
in the seasons. Fashion marketing is the method through which innovative products are made
available to the customers so that they can purchase it (Caro and Martinez-de-Albeniz 2015).
Marketing helps in providing better skills and knowledge so that the businesses can use it as a
competitive advantage and increase their sales in the market. Fashion is related to the various
marketing activities in an intrinsic manner so that it can help in analyzing the demands of the
customers and the various approaches that can be taken up so that the products can be successful
in the market. The marketers need to have a better training facility so that they can study the
market in a better manner and analyze the demands of the customers so that the products can be
offered in according to the needs and preferences of the customers (Liu et al. 2013).
Pricing
It is the factor through which the companies try to enter the market. The effective use of
the pricing methods will help the companies in gaining a competitive advantage in the market so
that it can help the companies in attracting customers towards them. This will also result in
increasing the value of the brand in the market so that the customers can help in increasing the
level of profit for the company. The market-skimming tactic of pricing strategy will help the
company in gaining a niche market within the society (Zarley Watson and Yan 2013). The

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fashion industry can use it to penetrate the market that is the unique quality and presentation of
the clothes will help in attracting the buyers at a higher price after which the price of the products
can be reduced. This type of strategy will help the company in identifying the potential
customers who are willing to purchase the products as well (Xu, Wang and Ouyang 2013).
The market-penetration mode of pricing strategy will help the company in making the
products available at a lower cost in the market so that they can capture the market with an
attractive range of prices. It will help in attracting the buyers, as the quality of the products will
not be hampered. It will help in increasing the volume of sales for the companies, which will
result in reducing the prices on a further basis (Perry and Towers 2013).
The product line pricing strategy will also help the fashion industry in Korea, as it will
take in to account the differences in the cost and the products that are being offered by them. It
will also help in finding out the differences between the perceptions of the value of the customers
regarding the various features that are present in the product. The optional strategy of pricing the
products will help in selling the accessories along with the main product so that it can be
beneficial for the customers in purchasing it. Moreover, the companies need to understand the
products that need to be provided at the base price and the products that will be given as an
option to the customers (Ferreira, Lee and Simchi-Levi 2015).
The fashion companies need to focus on segmented pricing strategy as well. It will help
the companies in understanding the segmentation that is present in the market so that the
products can be priced accordingly. The customer segment strategy of pricing will help the
company in charging different prices from different levels of customers. The price of the
products will also be affected with the location of the company in different parts of the country.

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The areas where the customers have a higher capacity of purchasing the items will invest more in
the products rather than the people who are living in the area that have a lower income rate
(Mehrjoo and Pasek 2016).
The strategy of budget pricing will help the companies in providing the products at a
lower price so that it can tend to all the categories of customer segments. Most of the customers
may try to avoid the quality of the products as they want to capitalize on the low price that is
being offered by the companies. The companies can add up the additional products so that it can
be sold together at a lower price, which will be cost efficient for the customers. This will help in
keeping the economies of scale at a lower rate so that the profits can be maximized by the
companies (Corbellini and Saviolo 2014).
The luxury style of pricing strategy will help in attracting the customers who are sensitive
to the price changes and are related to the image of the brand in a close manner. Most of the
customers in the current market are concerned with the status that they hold in the society so that
they can be at a higher level in the society. The marketing and the positioning of the brand in the
market helps the company in deciding the price structure that will help them in hg=gaining a
competitive advantage in the market (Choi 2016).
The pricing system that is based on value is placed between the luxury and budget
segments, as the companies need to maintain a balance between the quality and the cost of the
products. The customers who purchase the products are mostly based on the values that the
company have in the market, as they are willing to pay more to purchase the products. The
techniques those are available to push the prices of the product in the market has to be

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considered by the company so that it can help them in maximizing their profits as well (Gabrielli,
Baghi and Codeluppi 2013).
Internal factors affecting the decision of price
The price of the products can only be set by the company once the strategy that has been
adopted by the company can be decided on a priority manner. The choice of the target market
and the positioning of the brands in the market will enable the company in adopting the strategies
present in the marketing mix in a proper manner. The adoption of the profit maximization
strategy will enable the companies in increasing their level of profits by supplying the best
quality of products and targeting a certain section of people in the society (Jung and Jin 2014).
The primary strategy taken up by most of the fashion companies is that they want to survive in
the competitive market by changing the wants of the customers. This can happen when the prices
are set at a lower price, which will result in increasing the demand of the products of the
particular company. However, survival is a short-term objective, as the companies need to
understand the creation of value in the market that will help in attracting the customers in the
long run (Halvorsen et al. 2013).
Maximization of profits is another strategy that is taken up by the company in its pricing
techniques, as it helps in estimating the cost at various prices and finalizing on the best one that
will help in increasing the rate of profit for the company. This will also help the company in
being the leaders in the market, as the prices at which the quality is being provided to the
customers will help them in gaining a competitive advantage in the local market as well (Kim,
Jung Choo and Yoon 2013).

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Cost
Mostly there are two types of cost known as fixed and variable cost. Then fixed costs are
the ones that need to be incurred by the company, as they do not tend to vary that will help the
marketer in being able to sell the products in the market. The variable cost on the other hand can
vary according to the situations that are present within the company. It also can be controlled so
that the profits of the firm can be increased as well (Okonkwo 2016).
External factors affecting the decision of pricing
Most of the decisions regarding pricing the products are also dependent on the external
factors as well that result in influencing the pricing strategies that are taken up most of the
fashion companies. The demand of the products in the market plays an integral role in
determining the price that will be set for the product. It is of utmost importance for the marketers
of the company to understand the relationship between the demand of the product and the price
so that it can help in attracting the customers towards it (Dhurup, Mafini and Dumasi 2014).
When the market has a pure competition, it consists mainly of the sellers and the buyers
who are dealing with the same type of apparels within the industry. This will result in the
customers to choose the products that they want to buy, as most of the products are of the same
quality and are set at the same price. This is where the buyer or the seller cannot have an
influential role in determining the prices of the products, as uniformity is maintained within the
industry. In the case of fashion industry, it is however seen that different brand labels have
different price tags, as the quality of the product along with the goodwill of the company plays
an integral role in setting up the price of their products (Diamond, Diamond and Litt 2015).

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A market that is highly competitive will result in setting up the prices in such a manner
that will help in attracting the customers towards their particular brands. This is due to the fact
that there are many competitors that are present in the market and are offering the same quality
of product at a cheaper price so that it can help in grabbing the attention of the potential
customers. The main difference that will set the fashion companies aside is the way they develop
their products and the creative modes of communicating with the customers. The use of proper
advertisement channels will help the companies in targeting their potential range of customers so
that they can be attracted towards the products (Corbellini and Saviolo 2014).
The development of the markets on a global manner has also created an impact on the
Korean market, as monopolistic approach by the fashion industries cannot be taken up. A
monopolistic approach is where the sellers get to influence the price where as the buyers do not
influence the pricing strategies of the companies. The buyers have to purchase the products that
are being offered to them by the sellers at the fixed price (Choi 2016).
The Korean market is mainly oligopolistic with respect to the fashion industry, as the
customers have a higher purchasing capacity and are sensitive to the smallest alterations that are
being done on the prices of the products. This will result in most of the buyers to shift to another
brand when the prices are kept at a lower rate than their competitors. Therefore most of the
companies are sensitive towards the changes that are being done on the prices and needs to adjust
the price of their own commodities accordingly. This will result in attracting more number of
customers towards the particular company (Perry and Towers 2013).

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Perception of customers regarding price and value
It is seen that customers take the final decision regarding the price that has been set by
the company. The perception of the customers has to be taken in to consideration by the fashion
industries so that they are able to purchase the products. The companies also take in to account
the decision of the customers in purchasing the particular product, which helps them in setting up
the right cost in the market. The fashion companies need to take in to consideration the value that
the customers will get after the product is being purchased by them, which will result in setting
up the price in a correct manner. If the customers do not get any value from purchasing the
product form a particular brand, they would purchase it but the company will lose out its ability
to make profits in an eventual manner (Mehrjoo and Pasek 2016).
Relationship between price and demand
The pricing strategies of most of the fashion companies are affected by the demand that
they have among the customers.
Figure 1: Inelastic demand
(Source: Liu et al. 2013)

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Figure 2: Elastic demand
(Source: Zarley Watson and Yan 2013)
The demand curve helps in understanding the units of the products that are customers are
willing to buy within an estimated time period regardless of the changes in the price of the
products by the company. In a normal scenario, the relation between the demand and price is
inversely proportional where if the price of the product increases then the demand of that
particular product among the customers will result in a decrease. This would result in a shift of
the price from P1 to P2 (Fig. 2), which is known as elastic demand. The customers who have a
limited range of budget will shift to some other products of different brand label when the price
of the product becomes higher (Xu, Wang and Ouyang 2013).
Most of the companies try to analyze the demand curves in a proper manner by
estimating the prices at different levels and selling in the market. This helps the fashion
companies in setting the right price at which the customers are willing the purchase the product
from them. This relationship is present when the market is competitive in nature. In the case of
the monopolistic fashion industry, it would result in setting the prices high where the customers
have to purchase it by spending more (Okonkwo 2016).

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Price elasticity of demand
The elasticity of price has to be studied in a proper manner by the marketers so that it can
help them in understanding how their products will be demanded by the customers in the Korean
economy. The inelastic demand arises when the change in the prices of the product results in a
small shift of the demand, which does not hamper the ability of making profits for the
companies. Therefore the change in the price from P1 to P2 will result in a small change from Q1
to Q2 (Fig. 1), which is commonly known as price inelasticity. This means that the change in the
price of the price will not affect the company as the demand for the particular product will see a
small shift (Halvorsen et al. 2013).
The demand that is elastic in nature will result in lowering the prices of the product by
the fashion companies, as it would interfere with the ability to make profits by the company. This
can be practiced by the companies when the cost of production is less than the number of
products that are being sold in the market. This would lead to a better rate of return for the
companies (Dhurup, Mahini and Dumasi 2014).
Competitor cost
This is one of the major factors that affect the companies externally. An example of this
would be Zara who offers a premium price for the products, as they target a certain segment of
customers in the society. On the other hand, Gucci is another fashion barnd that is known for
extremely high prices, as they also target the same customers segment. These companies will try
to set their prices in a competitive manner so that it can help in attracting the customers towards
them. The quality of the products is not hampered, which would lead to dissatisfaction among
the customers. A purely competitive market will result in changes in the price of the products on
a constant manner so that it can help in attracting the customers and increase its volume of sales

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as well. This would enable the company to earn a higher profit and survive in the competitive
market as well (Jung and Jin 2014).
Conclusion
Therefore it can be concluded that the elasticity in the price of the fashion apparels will
attract more number of customers towards the product in Korea. It will help the companies in
increasing its sales and the level of profits as well. The companies need to constantly innovate
their products so that it can help in increasing their competitive advantage in the market. The
customers need to be provided with premium quality products so that it can result in satisfying
their needs and demands. It will also make the customers loyal towards the particular products,
which will result in less switch over to other companies. The variable cost of the products need
to be reduced to a certain extent so that the products can be available at a cheaper price. The use
of segmented strategy in pricing will allow the companies in segmenting their customers
according to their level of income so that they can be provided with the products according to
their needs and demands.

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