Pricing and Distribution

Structure

A. INTRODUCTION

1. Overview and Strategy Blueprint

2. Marketing Strategy: Analysis &

perspectives

B. WHERE ARE WE NOW?

3. Environmental & Internal Analysis:

Market Information & Intelligence

C. WHERE DO WE WANT TO BE?

4. Strategic Marketing Decisions,

Choices & Mistakes

5. Segmentation, Targeting

& Positioning Strategies

6. Branding Strategies

7. Relational & Sustainability

Strategies

E. DID WE GET THERE?

14. Strategy Implementation, Control

& Metrics

D. HOW WILL WE GET THERE?

8. Product Innovation & Development

Strategies

9. Service Marketing Strategies

10. Pricing & Distribution

11. Marketing Communications

12. E-Marketing Strategies

13. Social and Ethical Strategies

Learning

Objectives

Examine the separate and complementary roles

of pricing and distribution to marketing strategy.

Assess pricing mindsets and strategic options.

Evaluate the buyers perspective of distribution and its implications for strategy.

Introduction

Pricing and distribution are distinct yet

complementary elements in marketing

Strategically they are difficult to separate.

The price of anything and the route by which it is

distributed simply reflects its value.

Porters two generic differentiation strategies:

Low cost leader

Differentiation

Key Elements to Pricing

Value: Price is fundamentally about value. Customers place prices within the context of perceived value

Variable: Prices can be changed in a number of ways apart from the absolute level, such as by time form or terms of payment

Variety: Prices can be set at different levels across multiple products and services to achieve different objectives for positioning and contribution as with bundling or

unbundling items

Visible/Invisible: Prices may be open and visible or hidden and confusing for customers

Virtual: of all the decisions marketers make, a price change is arguably the easiest and quickest decision to make. It might not prove to be successful but the decision to raise or lower a price can be made quite straightforwardly in most

organisations

(Goldenberg, Horowitz, Levav and Mazursky, 2003)

Successful

Pricing

Variations

in Value

Reverse

Cost-Plus

POS

Price

Sensitivity

Individual?

Bundled?

Competitor

Reaction

Emotion Customer

Costs

Strategic Options

Target Pricing

Target pricing is a more novel approach to new product pricing.

The idea is to develop products and services from

the design stage and onwards with a final target

price objective for a particular market.

The main benefit is that target pricing is a

disciplined approach to pricing that brings the

reality of the market place throughout the entire

process, from idea conception to commercialization

Human Capital cost of training and hiring people for pricing

Systems Capital Hardware and software required for pricing

Social Capital External participants who influence pricing

Companies need to invest in all three

capitals for pricing

strategy to work

Implementing Pricing Strategy

Access

Search

Possession having

Transaction

C O N V E N I E N C E

Primary Concern of Buyers on

Distribution

Distribution Options

Direct

Internet Telephone

Mail Catalogue

Own channel

Salesforce

Own Another firms

Contract

Intermediary

Franchise Wholesaler

Agent/Merchant Distributor

Partner

Principal channels

Price & Distribution

Appropriate strategies for price and distribution should be synchronised

Clearly it would be a mismatch to distribute high priced luxury handbags in discount stores and would only confuse potential buyers

The inherent brand position and direction must be taken into account

Market position is another factor. A follower brand with a relatively small market share is likely to follow the price and distribution patterns of leaders and generally be sold at a lower price and be placed in slightly less favourable positions by distributors

The product life cycle (PLC) is also a consideration. The PLC is a tool in widespread managerial use (despite its problems) given it ability to provide some strategic insights

Market Leader Distribution in place Price main weapon

Premium price Variety of options

Market Niche Stay with markets

Add niches Premium price

Selective distribution

Market Challenger Focus on flanks

Direct or indirect attack

Market Follower Cloning

Set lower prices

Price & Distribution Strategies

Conclusion

Value holds the key to both pricing and distribution

Buyers are savvy and smart, most markets are mature with products and services near (or at) parity and distribution channels are varied and largely accessible physically and/or virtually

Any strategies attempting to rip off or over charge will fail and longer-term trust will evaporate, particularly with the information rich web

As a consequence of these challenges, price and distribution are likely to remain key issues in marketing strategy in the immediate future