Now that the product and promotional decisions have been made for the new product, Michelle is concerned about the pricing of the new product and the distribution channels that will be used to make the product available to customers. She has asked you to write a 2–3-page memo outlining two different pricing strategies that MM should consider.
MEMORANDUM
TO: Michelle
From:
Date:
Subject: The Distribution & Pricing Strategies
For a starter, the company needs to make sure that the set mission of the company is aligned with the overall objectives and goals of the company. By considering the objectives of the company the chosen team would have aided in making a strategy for certain market segments on having a better pricing strategy for a new product launch. By using the pricing strategy of penetration, the company can aid the entrance of the new product on the market. It is possible that this strategy would not yield much revenue in the starting phase, however, in the long term, the company would benefit from it. The penetration strategy is based on the assumption that the market is already competitive because of the presence of existing players. Therefore, the pricing of the product should be set while considering the competitor’s product prices to attract the target market into purchasing our product.
If the situation is that the market products are selling at higher prices as compared to the new product that is to be launched, then penetration strategy is the best option for the situation. An effective strategy is needed for the company for this purpose to attract most of the targeted customers. The lower prices of the product would cause the market to grab the chance of purchasing it at lower prices. Once sold, the company can provide them with the best customer service and maintenance services to convert them into loyal customers.
Promotion and marketing of the product, various mediums of promotions should be utilized to its fullest. The product should convey the right message to the market, and this message should have the right association with the targeted audience. Electronic advertising, print advertising, social media advertising, sponsorship of programs and events, billboards, and use of public places can elevate the promotions of the product launch. It is important to cover as much of our target market as possible during our product launch. The promotional expenses and cost of its production should be considered for setting up the pricing of the product as well. After the successful launch of the product, if the product is considered as competitive, then the management can move on to remove the discounted price and increase it to earn some good benefits (Louis, 2013). However, it is to be first considered that if the market has been receiving it only because of its discounted price or not. Because in this case, increasing the price would not be a good decision. The measurement of the Willingness to Pay of the consumers would be an appropriate measure to realize the price of the product (Wertenbroch & Skiera, 2002).
Distribution
Even with the best product and most amazing promotions, the market needs to have access to the product for actually buying it. Customers want to have the product in the closest places exactly when they want it. Therefore, the placement of the product in the right areas of the target market where they can approach the product and buy it when they need it is most essential. It is to be ensured that the distribution strategy is not only effective enough to get the products in the right places but also remains constant throughout the time. No shortages of products should be tolerated. For this, it is needed to have an effective continuous production plan. As per the forecasting of the need and demand of each distribution center, whether associated, private, or owned, the production and distribution of the product should be planned. The best intermediaries in product distribution should be chosen.
Intensive distribution is the right approach to make sure all geographical segments are covered in the distribution network. It also functions as the marketer and promoter of the new product. Agreements and contracts can be made by the distributors of the product. Profitable distributors can be contracted for a long-term period (Hill & Jones, 2007).
References
Hill, C., & Jones, G. (2007). Strategic Management: An Integrated Approach. Cengage Learning.
Louis, T. (2013, September 14). The Real Price Of A Smartphone. Retrieved from https://www.forbes.com/sites/tristanlouis/2013/09/14/the-real-cost-of-a-smartphone/#27b379985938
Wertenbroch, K., & Skiera, B. (2002). Measuring Consumers’ Willingness to Pay at the Point of Purchase. Journal of Marketing Research, 39(2), 228-241.
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