Pricing and Distribution
Pricing is one of the most important elements of the marketing mix as it is the only mix, which generates a turnover for the organization; the remaining 3p's are the variable cost for the organization. It costs to produce and design a product; it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship (Constantinides, 2006). Pricing a product too high or too low could mean a loss of sales for the organization. Pricing should take into account the following factors:
• Fixed and variable costs
• Competition
• Company objectives
• Proposed positioning strategies
• Target group and willingness to pay
An organization can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.
1. Penetration pricing- Is where the organization sets a low price to increase sales and market share.
2. Skimming pricing- The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
3. Competition pricing- Setting a price in comparison with competitors.
4. Product Line Pricing- Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits.
5. Bundle Pricing- The organization bundles a group of products at a reduced price.
6. Psychological pricing- The seller here will consider the psychology of price and the positioning of price within the market place.
7. Premium pricing- The price set is high to reflect the exclusiveness of the product. An example of products
• Fixed and variable costs
• Competition
• Company objectives
• Proposed positioning strategies
• Target group and willingness to pay
An organization can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.
1. Penetration pricing- Is where the organization sets a low price to increase sales and market share.
2. Skimming pricing- The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
3. Competition pricing- Setting a price in comparison with competitors.
4. Product Line Pricing- Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits.
5. Bundle Pricing- The organization bundles a group of products at a reduced price.
6. Psychological pricing- The seller here will consider the psychology of price and the positioning of price within the market place.
7. Premium pricing- The price set is high to reflect the exclusiveness of the product. An example of products
References: Constantinides, E. (2006). The marketing mix revisited: towards the 21st century marketing. Emerald, Vol 22 No 3-4 Literature review. Retrieved November 2, 2008, from ProQuest database. Mullins, W., Walker, C., Boyd W. (2004). Marketing Management: A Strategic, Decision Making Approach. [University of Phoenix Custom Edition e-text]. New York: The McGraw-Hill Companies. Retrieved November 2, 2008, from University of Phoenix, Resource, MBAMK/591¬-- Marketing Seminar in Problem Solving Course Web site. Reliance Communications (2008). Reliance Communications previews. Retrieved November 2, 2008, from http://www.rpl.co.in