Pricing strategy is an approach to pricing that every marketer is expected to use in relation to the company’s products. Pricing decisions should be critically approached because they play an important role on consumer demand and the competitiveness of a company’s product (Kotler and Armstrong, 2010, p. 32).
Prices should be effectively determined to maintain a good balance between profits and production. In most occasions, pricing strategy has been based on the costs of production (Kotler and Armstrong, 2010, p. 48). Apart from the costs of production, other external and internal factors should also be considered when coming up with a price.
As a matter of fact, pricing strategy plays a critical role in product positioning. In addition, it also affects other elements that make up a marketing mix. This means that there are various ways that can be used to determine the price of a given product.
Pricing can be either competition based, cost plus, loss leader, market oriented, price leadership, limit, target, absorption, marginal, predatory, price discrimination or psychological pricing (Mohan, 2005, p. 26). A unique thinking cap will therefore apply the best pricing strategy for sustainability. This is because it has a lot of products that need a different approach to pricing.
Penetration pricing strategy is mostly used to get a foothold in the market. This strategy is vital for companies that want to enter new markets with established players. In this case, prices are set at low levels to grab customers’ attention. In the long run, they will have more interest in the product.
This helps to drive up sales in the initial stages (Kotler and Armstrong, 2010, p. 47). Skimming pricing strategy sells products at very high prices with a high profit motive. High pricing is normally meant to offset the costs of research and development. This strategy is mostly used in electronic markets. As a matter of fact, it is only used for a limited duration of time before other tactics are employed (Mohan, 2005, p. 31).
Pricing tactics play an important role in product marketing. In this case, they have a direct impact on the competitiveness of a given product. Because companies face competition in the market, they have to keenly observe other products prices to come up with their own tactics (Shimizu, 2009, p. 62). In this case, prices can be the same with competitors’ products or they can be slightly lower. Product line pricing is mostly used when a company has more than one product in its line of products.
A unique thinking cap has a large product line like other competitors. The company has to compete with other established players like Aderans Co., Ltd. Aderans is the world’s largest manufacturer and distributor of caps and hair products. In addition, a unique thinking cap will also have to compete with Full lace wigs company ltd that specializes in wigs. These companies have different sets of prices to suit diverse segments of the market.
Prices range from $ 5 to $ 34 depending on the size and quality of the wig and cap. A unique thinking cap will adopt a unique pricing strategy in relation to different market segments. This is because caps and wigs are used by all age groups. For instance, the company’s prices will range from $ 4 to $ 32 as time goes by.
The company has settled on this pricing approach because the market is always changing as competitors adjust their strategies for sustainability. As a matter of fact, the company will be adjusting its prices depending on the prevailing market conditions.
Prices should be set after giving the products a different look. As a matter of fact, a product can be dependent on one or the entire product line. This therefore leads to the emergence of different price points (Kotler and Armstrong, 2010, p. 51). Product line pricing should be used throughout the products life cycle. In addition, there should be strong product differentiation for sustainability (Shimizu, 2009, p. 42). Value pricing offers products at reasonable and fair prices.
These prices are supposed to make sense to different consumers. This is because customers always want value for their money and this should be reflected in prices (Mohan, 2005, p. 29). Differential pricing can also be called discriminatory pricing. This is because a product ends up having different prices based on the type of customer or even the quantities that have been ordered. Pricing in this case can also be done based on the delivery time and other factors (Shimizu, 2009, p. 51).
Legal and ethical issues
There are various issues that are directly related to the pricing tactic that a given organization will choose to use. Ethical issues like social equity affect the pricing tactic in abroad way. This can be sliding versus fixed scale fees that will dictate the price. The impact and fairness of the price to the public should also be considered as this will affect consumer demand (Mohan, 2005, p. 36).
There might be instances where a company is forced to disclose the costs of production. This will ultimately affect the pricing tactics as there will be a lot of scrutiny on prices. Different countries have laws that guide predatory pricing and this affects a company’s tactics (Kotler and Armstrong, 2010, p. 54). For instance, there are various legal guidelines in predatory pricing for pharmaceutical products to protect consumers.
In other markets, there is a minimum pricing enforcement that affects the pricing tactics that a company might intend to use (Mohan, 2005, p. 43). This restricts product pricing within the set limits as violation might attract a lot of penalties (Shimizu, 2009, p. 73). Some countries have Competition acts and this can dictate pricing leaving a company without options in its pricing tactics. Pricing should be done within the law and expected societal ethics.
Marketing distribution channel
A marketing distribution channel defines the movement of products to the final consumer. Therefore, it is an important element of a given marketing mix (Mohan, 2005, p. 65). A good marketing and distribution channel ensures that products are readily available to the final consumers. As a matter of fact, it is a chain of intermediaries with each of them delivering the product down the chain until it reaches the final place (Kotler and Armstrong, 2010, p. 60).
This channel can involve wholesalers, distributors and retailers. Although each of them might have his own goals and targets to achieve, they all have a common objective of ensuring that goods reach the final end user (Shimizu, 2009, p. 32). Therefore, in coming up with a marketing distribution channel, the producer should ensure that the needs of the channel members and the end user are attended to.
All the chains in a marketing and distribution channel are bound together by the product and therefore end up forming strategic alliances for sustainability (Shimizu, 2009, p. 33). The needs of individual channel members can be different from the final consumer needs. In this case, channel members are more concerned with profit margins and incentives.
A distribution strategy outlines how a company will move products from the point of manufacture to final consumers (Kotler and Armstrong, 2010, p. 54). This should be done in a more effective and cost efficient manner. In a broad perspective, distribution strategy is part of a company’s marketing mix and determines the success of the product in the market (Shimizu, 2009, p. 69).
It fits the product and service because customers should get products at the right time and place. Through an effective distribution channel, goods will reach their target destination without any problem and thereby enhance the marketing mix (Kotler and Armstrong, 2010, p. 26).
Companies should develop effective distribution channels that will ensure that goods reach their target markets. A target market should be well identified and crafted in a company’s distribution channel for efficiency (Mohan, 2005, p. 23). Because of increased competition, a good distribution strategy should add value to the marketing mix.
After a company has identified its target market it should market itself well and ensure that consumers can access the product more cost effectively. This can only be achieved through an efficient distribution channel and strategy.
Every company has its own marketing objectives as far as its products are concerned (Kotler and Armstrong, 2010, p. 47). As a matter of fact, a company’s marketing objective is to ensure that products reach the market without any problem.
After creating awareness about a product, companies strive to ensure that the given product is physically present in the market (Shimizu, 2009, p. 35). This is only achieved through an effective distribution strategy. Wholesomely, a distribution strategy plays an important role in the achievement of a company’s marketing objectives.
Kotler, P., & Armstrong, G. (2010). Principles of Marketing. Upper Saddle River: Prentice Hall.
Mohan, R, J. (2005). International Marketing. New Delhi: Oxford University Press.
Shimizu, K. (2009). Advertising Theory and Strategies. Japan: Souseisha Book Company.