Question

answer the following questions based on the learning and your personal knowledge – with the concept of Best Practices at mind.

Your team has been charged with considering a proposal to open your own retail locations and need to determine the following:

Presently, your distribution channel looks like this Manufacturer (you) sells to Wholesaler (grocery distributor in local area) who sells to the retailer or restaurant. You would be the first company of your type to go direct to the customer with retail stores. What other success stories can your company look to to emulate and why? (Try to think of at least two manufacturers who have opened their own retail locations).

Thinking of your target customer, where would you want to locate these retail stores (types of locations – not exact addresses)? Why?

How would you position your retail locations – ie. Store image, target customer, positioning statement?

Describe your store – pay special attention to atmospherics? What types of merchandise would you carry? What types of services would you offer? How would you make your location have a unique competitive advantage that would be difficult for a competitor to copy?

You want to give your boss alternatives, because you feel that what he really wants is to re-evaluate the distribution method (place function). So what other options might you present to your boss (other than opening your own retail stores) and why (come up with at least two other options)

At present, one of your products is priced between $1.50 and $4.50 in a range of retail outlets (from convenience stores to grocery to online sellers) – suppose it costs $0.50 to make and package the product, $0.50 is profit to your company, and the distributor makes $0.50 per item with the retailer taking the remaining margin (if any). What do you suppose the current pricing strategy is? Is this an effective price strategy? Why or why not?

Your CEO has come to you and asked that you develop a NEW approach to pricing for your product for a specific new distribution outlet (he won’t tell you much, but it will reach a new target market: urban, mid to upper-income, multicultural, 20s-30s). What pricing strategy will you utilize and why?

How does this new pricing strategy fit with the Marketing Mix, Positioning, and Differentiation strategy for your company? What other creative new pricing methods might your brand consider to appeal to current customers and sell more product?

Answer 1

There are different types of pricing method we consider to sell more product

1. Pricing at a Premium

With premium pricing, businesses set costs higher than their competitors. Premium pricing is often most effective in the early days of a product’s life cycle, and ideal for small businesses that sell unique goods.

Because customers need to perceive products as being worth the higher price tag, a business must work hard to create a value perception. Along with creating a high-quality product, owners should ensure their marketing efforts, the product’s packaging and the store’s décor all combine to support the premium price.

2. Pricing for Market Penetration

Penetration strategies aim to attract buyers by offering lower prices on goods and services. While many new companies use this technique to draw attention away from their competition, penetration pricing does tend to result in an initial loss of income for the business.

Over time, however, the increase in awareness can drive profits and help small businesses to stand out from the crowd. In the long run, after sufficiently penetrating a market, companies often wind up raising their prices to better reflect the state of their position within the market.

3. Economy Pricing

Used by a wide range of businesses including generic food suppliers and discount retailers, economy pricing aims to attract the most price-conscious of consumers. With this strategy, businesses minimize the costs associated with marketing and production in order to keep product prices down. As a result, customers can purchase the products they need without frills.

While economy pricing is incredibly effective for large companies like Wal-Mart and Target, the technique can be dangerous for small businesses. Because small businesses lack the sales volume of larger companies, they may struggle to generate a sufficient profit when prices are too low. Still, selectively tailoring discounts to your most loyal customers can be a great way to guarantee their patronage for years to come.

4. Price Skimming

Designed to help businesses maximize sales on new products and services, price skimminginvolves setting rates high during the introductory phase. The company then lowers prices gradually as competitor goods appear on the market.

One of the benefits of price skimming is that it allows businesses to maximize profits on early adopters before dropping prices to attract more price-sensitive consumers. Not only does price skimming help a small business recoup its development costs, but it also creates an illusion of quality and exclusivity when your item is first introduced to the marketplace.

5. Psychology Pricing

With the economy still limping back to full health, price remains a major concern for American consumers. Psychology pricing refers to techniques that marketers use to encourage customers to respond on emotional levels rather than logical ones.

For example, setting the price of a watch at $199 is proven to attract more consumers than setting it at $200, even though the true difference here is quite small. One explanation for this trend is that consumers tend to put more attention on the first number on a price tag than the last. The goal of psychology pricing is to increase demand by creating an illusion of enhanced value for the consumer.

6. Bundle Pricing

With bundle pricing, small businesses sell multiple products for a lower rate than consumers would face if they purchased each item individually. Not only is bundling goods an effective way of moving unsold items that are taking up space in your facility, but it can also increase the value perception in the eyes of your customers, since you’re essentially giving them something for free.

Bundle pricing is more effective for companies that sell complimentary products. For example, a restaurant can take advantage of bundle pricing by including dessert with every entrée sold on a particular day of the week. Small businesses should keep in mind that the profits they earn on the higher-value items must make up for the losses they take on the lower-value product.

Pricing strategies are important, but it’s also important to not lose sight of the price itself. Here are five things to consider, alongside your strategy, when pricing your products

As per the case study the pricing strategy involve in the case is competitive pricing ,

Which means selling at cost and adding part of profit

If My CEO has come to develop new approach to pricing for product for specific distribution outlet

Than I will consider retail pricing strategy and choose the following techniques

To start, let’s define the eight most common pricing strategies. While we won’t get into too much detail, it’s good for you to know what options are out there.

Discount:	Discounts can be based on product quantity, customer loyalty or tied to specific promotions.
Bundle:	Multiples of the same product are sold together for a single price—typically less than they would cost if purchased individually.
Below competition:	Products are priced lower than the closest competitor pricing. While difficult to sustain long-term, this strategy can be used to meet short-term goals.
MSRP:	The manufacturer’s suggested retail price. This is usually set to maintain the manufacturer’s margins and its brand perception.
Odd pricing:	Ending prices in odd figures, such as 99 cents. Odd pricing plays on customer psychology to create a greater perceived value.
Price lining:	Prices are set to create distinct categories/tiers of products, signaling a level of quality to the customer.
Dynamic:	A technology-driven strategy where retailers change prices based on the willingness of the customer to pay.
High-low:	Most products are priced above market rate so that items can be discounted to attract customers with “low prices” without retailers actually incurring losses.