...#3 Pricing Strategy and Channel Distribution Marketing Management – MKT 500 February 15, 2012 Pricing Strategy and Channel Distribution Determine and discuss a pricing strategy (Skimming and Penetration). One of the four major elements of the marketing mix is price. Pricing is very important strategic element. The pricing strategies impinge on featuring products, channel decisions, and promotions. This strategy helps marketers set prices. (Pride, Hughes, & Kapoor, 2011) There are many ways to price a product. Two commonly known pricing strategies are skimming and penetration. Lavishness Hair Studio is likely to use one or both of them over a calculated period of time. Price skimming involves charging the highest price possible for a short time where a new, innovative, or much-improved product is launched onto a market. The objective with skimming is to “skim the cream” off customers who are willing to pay more to have the product sooner. Prices are usually lowered once demand falls. Penetration pricing is the opposite; it involves the setting of lower, rather than higher price for a new product. The seller wants to discourage competitors from entering the market by building a large market share quickly. The plan is to raise prices as soon as the introductory offer is over (Pride, Hughes, & Kapoor, 2011). Lavishness Hair Studio will use price penetration during the initial opening phase of the business. Penetration pricing is the strategy of entering...
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...Introduction to pricing strategies 2 1.2 Introduction to Apple Incorporation 3 2. Skimming Price Strategy 3 2.1 What is Skimming Price Strategy? 3 2.2 When to use Skimming Price Strategy? 4 2.3 Benefits of Skimming Price Strategy? 5 3. Apple’s iPhone Strategy 6 3.1 Market Segment 7 3.2 Product Life Cycle and Elasticity of Demand 7 3.3 Brand Loyalty 9 3.4 Sales and revenues 9 4. Conclusion 11 5. References 11 1. Introduction 2.1 Introduction to pricing strategies Pricing strategy is the pursuit of identifying the optimum price for a product. This strategy is combined with the other marketing principles known as the four P's (product, place, price, and promotion) to position its brand in the market. Pricing strategy is perhaps the most critical components of the marketing mix as it is the only P’s which focused on generating revenue and ultimately profit for the company. The remaining 3p’s are the variable cost for the organization because it costs to design and produce a product; it costs to distribute a product and costs to promote it. Companies may use a variety of pricing strategies, depending on their own unique marketing goals and objectives. Some of the pricing strategies are Penetration Pricing Strategy and Skimming Pricing Strategy. A Penetration Pricing Strategy is designed to capture market share by entering the market with a low price relative to the competition to attract buyers. On the other hand, Skimming Pricing Strategy is aimed...
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...Pricing Strategy: Ecaterina Curova Jason Geesey LCC International University November 13th, 2013 Pricing Strategy: Pricing is the moment of truth; it is when all of the company’s marketing and financing strategies really meet the final decision point with its customers (Kotler & Armstrong, 2012, p.314-315). “One of the key aspects of getting the financial control of the business is developing a pricing strategy for its particular market so the product or service can be sold properly” (“Developing a Pricing Strategy for Your Business,” 2010). If a company has a good pricing strategy for the financial basis and a good marketing strategy than it is very easy to sell the product (“Developing a Pricing Strategy for Your Business,” 2010). There are two ways of pricing the product or service in the market: value-based pricing and cost-based pricing. Value-based pricing is looking on how customers value the product and is basing the price on that (Kotler & Armstrong, 2012, p.315). If a medical engineer has a pill that costs him a dollar to make, however, it can cure cancer, customers are going to pay him a lot more money than one dollar for it. Businesses look at what value people put on their product and price it accordingly. On other side there is a cost-based pricing which looks at how much money a company has to spend to make their product and bases its cost on that (Kotler & Armstrong, 2012, p.319). There are a lot of different pricing strategies that are connected...
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...achieve this welfare objective, each resource should be used to perform the functions by which it contributes most efficiently to society. In a market economy, the price system allocates these resources. That is, prices furnish the guideposts that indicate how resources should be used. Prices determine what products and services should be produced and in what amounts. Prices determine how these products and services should be produced. And prices determine for whom the products and services should be produced. Thus prices affect both incomes and spending behavior. For the consumer with a given income level, prices influence what to buy and how much of each product to buy. For business firms, profits are determined by the difference between revenues and costs, with revenues determined by multiplying price per unit sold by the number of units sold. Price changes also play a major role in a market economy. When the quantity demanded for a product or service is greater than the supply available, buyers bid the price up. If costs remain the same per unit sold, the higher price leads to greater profits and an incentive to invest in resources to produce even greater quantities of the product. Thus, the producers are able to bid more for raw material resources, thereby directing resources into their industry. In addition, higher prices may also stimulate a greater rate of innovation and the development of new technology. On the other hand, if available supply is greater than demand, pressures...
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...discuss a pricing strategy (Penetration or Skimming). Pricing is very important strategic element. The pricing strategies impinge on featuring products, channel decisions, and promotions. The researcher realizes there is no real determine pricing, following a life cycle for developing the pricing of Destini’s Closet product. First, develop market strategy – which the researcher evaluated and conducted a marketing analysis to identify the market segments, target market, SWOT analysis, and the market positioning. Second, marketing mix decisions – the researcher defined the product (Clothing), contacted manufactures for distribution, and decided promotional tactics. Now the researcher is focusing on the cost productions, price of substitute products, and prices offered by the competition. The researcher notices that competitors change their prices often. Case scenario, competitors are always looking for a competitive match, this can be an advantage and a disadvantage for the business. Competitors may strategize a different packaging of their product; this can be good for Destini’s Closet by reducing their price. It’s all up to the customer wants and needs. The demographic crowd the researcher is focusing on would rather price reduction then a new look to a product. What if production price are rising? If production price is rising it’s up to the Destini’s Closet to determine the price increase without turning the customers to their competitors Two commonly known pricing strategies...
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...Evaluate the four pricing options available to Atlantic Computer. What would be the most effective pricing strategy for Atlantic Computer? Why? Jowers has four pricing options for Atlantic Computers. He must decide to either: 1) keep the company's tradition of charging for software and providing PESA software for free, 2) charge a price equal to what the customer would pay for four Ontario Zink servers, 3) charge a price based on a cost-plus approach to pricing PESA, or 4) charge a price based on value-in-use pricing. The traditional pricing strategy involving charging for software and giving the PESA software for free. This strategy does not allow major emphasis on developing and selling software tools tlo enhance their servers' performance. According to Bharadwaj & Gordon (2007), when the division has designed a small software management tool to help server administrators monitor the health of their systms and be attentive to repairs, this tool had not been viewed as a deal maker, as previous software tools were given away at no cost. The competition-based pricing strategy involves pricing your product to cover costs and is comparable to the competitor's price. To improve market penetration, the price must lure consumers toward your product and away from the competitor's product. For this approach to be successful, the company will most likely have to lower their price (Government of Alberta, 1999). This approach does not coincide with Jower's option of pricing the Atlantic...
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...MARKETING MODULE 5 SLP PRICING STRATEGY PRICING STRATEGIES AND TACTICS Pricing strategies can vary throughout the marketplace and the different companies. Pricing is an important strategic issue because it is related to product positioning. Pricing also affects other marketing mix elements as well, such as product features, channel decisions, and promotion. A pricing strategy is a course of action designed to achieve pricing objectives. This strategy helps marketers set prices (Pride, Hughes, & Kapoor, 2006). The types of pricing strategies and the tactics that Lowe’s uses are “at-the-market”. Different types of pricing strategies are skimming, penetration pricing, everyday low pricing, and cost-plus pricing to name a few. The many different ways that Lowe’s keeps itself competitive in the marketplace is by combining the some of the different types of strategies for their various products. When a new product comes out that the public has been waiting for they could use the skimming strategy. This means that Lowe’s might set a higher price initially in order to target the consumers that want it right away and are willing to pay a higher amount without waiting for pricing to level out. One example might be a new type of refrigerator that has come out and been advertised and is very energy efficient and has modern features to appeal to the consumer. Another method that is more commonly used is penetration pricing. This type of strategy is used to offer a low initial...
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...Chapter 5 Pricing strategies LEARNING OBJECTIVES After reading this chapter you will: n n appreciate the strategic significance of pricing decisions in marketing strategy understand the approaches to pricing of the economist and accountant, together with their contributions and limitations in the context of the price setting process n apply a framework to pricing decisions based around the key inputs to these decisions n understand the main pricing methods and their relative advantages and disadvantages 160 Pricing strategies INTRODUCTION The price of a company’s products and services represents the vehicle for that company to achieve its financial objectives. It is through price and volume that revenue is generated. Price equates to the financial sacrifice that the customer is willing to make to purchase the product or service desired. The important criterion of pricing is problematical to marketers. This is attributed to the uncertainty associated with pricing decisions as it is a complicated area of decision making. It is with a view to examining this problem and the ways in which it can be resolved that his chapter is framed. The pressures of today’s market environment place increasing burdens on management. It is important, therefore, that the decision maker has a framework for making pricing decisions. We start by examining the traditional economist’s view of price to illustrate both the shortcomings and potential contributions of this approach as a prelude to discussing...
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...ABSTARCT Marketing is the process of planning and executing the concepts of pricing, promotion and distribution of ideas, goods and services that satisfy individual and organizational goals (AMA). Successful marketing requires a winning strategy. Understanding marketing strategy formulation lets you properly evaluate your organization's marketing needs. You can then gear your marketing strategies to achieve maximum effectiveness. Marketing strategy formulation is the process of defining an organization's marketing goals and objectives. This allows formulators to create a guide. They examine the market and in doing so, use that information to determine what marketing approaches will be best at reaching clients and enticing them to seek out the business' services. Products and services constitute the platform for attracting customers, basically all organizations are in the business of attracting customers. Hence, the need to compete favourably. As a general rule, a good first step in a marketing strategy formulation is determining what you want to accomplish in terms of marketing. It could be as simple as letting potential customers know what you sell, and how your product can benefit them.The next step is to examine internal and external trends. These could include spreading the word about a next-generation version of one of your products (internal), and how it improves upon other products in the industry (external). After that, assign a value to the strategy's outcome...
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...found many definition of price. However, the basic idea is that it is an amount that is charged to a product (or services). Due to that, it may carry other names, depending on the situation or context. It may include fees, rate, rent, tax, salary etc. In setting price, marketers may adopt fixed price or dynamic price. Example of fixed price is when you buy goods at the supermarket. You can’t negotiate on the price. Dynamic price, on the other hand, is an approach whereby the price is flexible. For example, when you buy goods at pasar malam or pekan hari. You can actually bargain with the seller. Whatever approaches adopted by the marketers, they actually set the price based on one of the three factors, namely cost, customer perceived value or competitors price. Cost is considered as the price floor. If marketers set the price below, they will experience a loss. So, a sound marketers usually don’t do that unless they plan for market rollout. In fact, they commonly set the price at the cost or known as break even (balik modal), or with a profit, either using cost-plus method or target profit method. Cost-plus is the easiest method to set price. For example, if you want a profit of rm2, given the cost is rm10, you will charge the product at the price of RM12. Another method is, if you want 20% profit, you will set the price at RM12 (1.2*RM10). For break even or target profit pricing, you may choose to use break even chart. Please review text and slides for detail. When marketers...
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...A pricing strategy is an important element of marketing mix since apart from being related to the positioning of the product, it has effects on other elements of marketing mix including channel features, promotions and product features. The strategy in its development has some general steps that necessitate following including developing a market strategy, making market mix decisions, estimating the demand curve, calculating the cost, understanding the environmental factors, setting price objectives and determining the price without necessarily following the order. The various pricing strategies include cost- plus , target return , value- based and psychological pricing. In cost- plus pricing, the price is set at the cost of production in...
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...Branding, Pricing, and Distribution Deloise Perkins Marketing Management 500 DR. William Bonaparte Jr. Branding, Pricing, and Distribution Branding, pricing, and distribution are all integral parts of a strategic marketing plan. Each segment of the plan needs to be developed individually with the entire culmination of the plan in mind. The purpose of this paper is to create the domestic and global product branding strategy, determine the optimum pricing strategy, and examine how the company’s pricing strategy supports the branding strategy. Domestic and Global Strategy A global marketing strategy that totally globalizes all marketing activities is not always achievable or desirable (differentiated globalization). In the early phases of development, global marketing strategies were assumed to be of one type only, offering the same marketing strategy across the globe. Leverage is gained from competing in the same category country after country and may come in the form of product technology or development costs. This strategy will single out no one and try to involve everyone. Since Toys" R" Us stores are not physically available in some countries, technology will helped with global marketing.Selecting the form of global product category implies that Toys" R" Us will stay within that category will consider targeting different segments in each category or varying the product, advertising and branding according to local market requirements. Toys" R" Us domestic and...
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...Introduction Pricing Strategy Analysis of pricing strategies for a variety of factors and goods means the cost to cover overhead and gross margin pricing. Business licenses, real estate fees, electricity, administrative costs, such as mailing and advertising costs have many. The price of your product, but it should not appeal to consumers to ensure survival. For profit, but it also, as well as the cost of the product is based. Before you start a business or product is ready to start pricing strategy. How real and how much profit considering the cost of entry for future growth. The competition, location, customer base and how many people are getting what is expected to sell. High traffic in the middle of sellers with high income business environment, a more expensive product can take a lot of foot traffic to attract are not located in the suburbs a higher profit settings, and where people do not have luxury items needed, or income level. Factors that may affect the pricing strategy. Most retailers, according to the fixed mark - pricing strategy, pricing strategy allows the market to another. With retail prices allowed their pricing strategies are focused on the customer. It's the price from the beginning of an effective pricing strategy can explain the factors to consider. What is pricing ? How to set the selling price adopted by the company. It typically depends on the company's average cost of competitive products and value than the product of someone's perception...
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...Customer value-based pricing strategies: why companies resist Andreas Hinterhuber Andreas Hinterhuber is based at Hinterhuber and Partners, Innsbruck, Austria. Introduction Pricing has a huge impact on profitability. Pricing strategies vary considerably across industries, countries and customers. Nevertheless, researchers generally concur that pricing strategies can be categorised into three groups: 1. cost-based pricing; 2. competition-based pricing; and 3. customer value-based pricing. Of these, customer value-based pricing is increasingly recognised in the literature as superior to all other pricing strategies (Ingenbleek et al., 2003). For example, Monroe (2002, p. 36) observes that: ‘‘ . . . the profit potential for having a value-oriented pricing strategy that works is far greater than with any other pricing approach’’. Similarly, Cannon and Morgan (1990) recommend value pricing if profit maximisation is the objective, and Docters et al. (2004, p. 16) refer to value-based pricing as ‘‘one of the best pricing methods’’. Practitioners have also recognised the advantages of value-based pricing strategies. Several companies have successfully adopted such strategies. These include pharmaceutical companies such as Sanofi-Aventis, information technology companies such as SAP and Vendavo, wireless internet service providers such as the Australian company Xone, airlines such as Lufthansa, vehicle manufacturers such as BMW, and biotech companies such as Tigris Pharmaceuticals...
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...Chapter 9 Pricing: Understanding and Capturing Customer Value Previewing the Concepts: Chapter Objectives 1. Discuss the importance of understanding customer value perceptions and company costs when setting prices. 2. Identify and define the other important internal and external factors affecting a firm’s pricing decisions. 3. Describe the major strategies for pricing imitative and new products. 4. Explain how companies find a set of prices that maximize the profits from the total product mix. 5. Discuss how companies adjust their prices to take into account different types of customers and situations. 6. Discuss the key issues related to initiating and responding to price changes. Just the Basics Chapter Overview Pricing is the second element in the marketing mix. It plays a powerful role, and that role is detailed in this chapter. There are several sections to this chapter and a lot of material to address. The chapter begins with discussing what a price actually is. It makes the point that price is more than just the money the buyer hands over to the seller—the broader view is that the price is the sum of all the values that the buyer exchanges for obtaining or using the product. There is also a brief discussion of dynamic- versus fixed-price policies, and how we as a society have evolved from dynamic to fixed and back to dynamic again. The chapter then moves into the heart of pricing. Both internal and external factors that...
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