Product, Pricing, Channel, Promotional Strategies - Essay Example

?Category Product Strategy 1 Provide the rational for why the following Product Life Cycle characteristics occur: • Time Period Zero: Sales start at zero and improve, yet profits are negative. The time-period zero is characterized by zero sales at the beginning when a new product is introduced into the market. The potential consumers must get to know about the product, its features and advantages before they decide to buy the products. Hence, this period has low sales and so profits are negative. Consumers eventually build liking and preference for the product and then start purchasing. • Mid-way through the Growth Stage: Sales increase at a decreasing rate and profits begin to flatten. Once the sales pick up, profits pour in and demand increases. However, this is followed by slower rate of sales as the markets become saturated with similar products and competition. Although new consumers continue to buy the product, competition by substitutes causes significant decline in sales for the original product. • Mid-way through the Maturity Stage: Sales peak and profits begin to decline. How can a company attempt to stop the decline? The company can handle this decline by introducing different products with similar and alternative features and maintain stable or slightly lesser prices. The company can freeze distribution channels and try to generate demand linked to the previous products. 1.3 You have been hired as a consultant to develop a branding strategy for a new product line. Discuss the strategic importance of branding and the key types of branding decisions that should be considered. Branding becomes extremely important as well as beneficial for new product sales and profit. Branding helps consumers to make quick buying decisions as it promises of certain level of quality and protection. Branding helps in systematic business institution through inventory and records. Branding provides protection through trademarks, patents, and copyrights. Branding also helps in attracting more consumers, proper communication of the positioning of the product and in gaining competitive edge in the market. Branding should be based on symbols, slogans and brand names that are memorable, meaningful and preferable. The brands should be easily transferable to other product lines, adaptable and protectable from competitors. Category 2: Pricing Strategy 2.1. Consumers of professional medical services (e.g., physician, dentist, etc.) tend to be more price sensitive than consumers of soft drinks. Utilizing five of the ten key factors that influence consumer price sensitivity, discuss whether the statement above is true or false. It is true that consumers of professional medical services tend to be more price sensitive than consumers of soft drinks. For instance, the perceived substitute effect describes that price becomes significant deciding factor if consumers perceive the price of a specific product to be higher compared to its possible substitutes, which is the case in pharmaceutical products. Considering the expenditure effect, consumers tend to choose alternative options if they feel the price is high and unaffordable. Soft drinks are usually priced on similar lines, unlike healthcare products. Consumers unwilling to spend more money on healthcare products, which are occasional requirements and are often unplanned in their expenditure, tend to consider price before choosing the product. Considering the shared-cost effect, consumers look for external financial help to buy specific product, especially health care product, through insurance and other means. When they can aid their health care expenses through insurance, they do not feel the pressure of high pricing. The Price-Quality effect plays a major role in choosing specific pharmaceutical products as it is associated with their psychology. If consumers had earlier had good experience with certain medicines, then fluctuating or increased price will not be a deciding factor in purchasing the same product once again. Unique value effect that consumers experience with some treatments or medicines make the consumers less sensitive to products price because the differentiating value of the products become more important. Most consumers prefer their health and well being to price or expenditure, when in grave need for betterment of health. 2.2. Discuss the strategic importance of understanding price, income, and cross price elasticity when formulating an effective pricing strategy. From consumers’ perspective, pricing strategy is dependent upon price elasticity, income elasticity and cross price elasticity. When demand is elastic, price becomes sensitive and fluctuates and inelastic demand can cause stable pricing. However, price elasticity cannot remain same over time and place. When demand for a product is dependent upon price change in another product, cross price elasticity occurs, which can be negative and/or positive. This is more evident when a company produces different product lines that are used together. In such cases, one or more of the products that are used jointly can be priced lesser than the others so that demand can be maintained. When consumers’ income rises, it can lead to less demand, resulting in negative income elasticity. Income elasticity also depends upon the nature of the products. When income rises, demand can rise for highly priced items or luxury items. When income decreases, demand may rise for less priced items. Because of such behavior of demand, it is important to consider price, income and cross price elasticity when formulating an effective pricing strategy. Category 3: Channel Strategy 3.1. Two of the dimensions that make-up channel structure are (a) length of the channel and (b) intensity at various channel levels. From a managerial standpoint, (1) please explain the rationale for utilizing channels of different lengths and intensities; and (2) discuss what would be appropriate length intensity levels as they relate to traditional consumer product classifications of convenience, shopping and specialty goods. Channels of different lengths and intensities may be used to reach maximum consumers and obtain large market share. For instance, intensive channels are formed by including all possible intermediaries like agents, wholesalers, retailers, distributors etc. Whereas, exclusive channels are formed by including only one intermediary. Intensive channels are best suitable for marketing convenience products such as soft drinks, groceries etc. Few selective channels are used, such as only wholesalers or distributors, when reaching out to multiple retail outlets for products that consumers pay more attention before buying. Consumers tend to search for information before buying these products. Sales of such products are lesser than convenience products, hence including lesser intermediaries would be the best option for such products. Exclusive channels are used to market products that are highly priced; such channels are restricted to exclusive retailer in the market. Specialty products that are expensive and infrequently purchased are limited to exclusive retailers or show-rooms, and are provided sufficient after sales support. For example, specific automobiles are available only through exclusive retailers. Unsought products are usually marketed by the company or through single channels such as contracted marketers. These products are relatively new and are unknown to the consumers. Hence, the company takes the responsibility of bringing the product into the market before trusting it to third-party channels. 3.3. Many would argue that sales transactions would be much easier if consumers could simply buy directly from the manufacturer. Despite this viewpoint, what role do wholesalers and retailers serve within the marketing channel? Intensive channel strategy allows better market penetration because products can be sold through every possible outlet, and can reach all types of consumers. Transaction efficiency can be achieved through intermediaries. Sales promotions through intermediaries such as wholesalers and retailers can achieve increased reliance on targeted communication methods and segments. Wholesalers and retailers aid in trade promotions. Further, marketing through channels helps in focusing and performing activities of marketing and sales in more efficient manner. This results in higher sales and profits. By including different channels and bringing competition among the channel members, sales and profits can be optimized. The manufacturers can achieve this by exercising different forms of power such as reward power, coercive power, legitimate power, expert power, and referent power. Through reward power, manufacturer can enhance competition through awards and grants to channel members. Through coercive power, manufacturer can pressurize channel members for better performance and sales. Through legitimate power, manufacturer can work on contract basis. Channel members’ expertise can be used for better sales and profits. Competition among channel members can be used by the manufacturer to improve their sales and profits. Category 4: Promotional Strategy 4.1. (1) What is the basic idea behind integrated marketing communications (IMC)? (2) Identify four of the five MarComm tools that marketers have available to them and briefly describe a situation which would lend itself to using that promotional tool. When answering this question, provide examples that would be consistent with an IMC perspective. The basic idea behind integrated marketing communications (IMC) is to integrate all practices that are meant to communicate about company’s products to its potential consumers. Various marketing tools include personal selling, advertising, public relations and sales promotion. All these tools can be applied for marketing and selling insurance products. For instance, personal selling helps in allowing the sales person to understand his consumers better and adopt an approach that would suit the consumers’ personality so that the insurance product can be successfully sold. By advertising the insurance product through banners, media ads, brochures etc, consumers can be informed about the products and their benefits, which can further influence the consumers’ buying decisions. Public relations can be used to enhance brand image and publicity of the company before attempting to market and sell the insurance product. Building public relations through events, media coverage, community works, seminars, etc help in improving brand image of the company. Lastly, sales promotion can be used to acquire immediate response and sales from the market. Providing online coupons, conducting contests etc attract large numbers of consumers in short span of time. All these practices can be simultaneously applied for marketing and sales of insurance products. Read More