The Considerations that Need to Underpin Decisions on the Pricing Strategy - Case Study Example

? Net-a-Porter Contents Introduction 3 What are the considerations that need to underpin decisions on the pricing strategy? 3 What are the advantagesand disadvantages in establishing theoutnet.com as a discounted distribution channel? 6 Net-a-Porter launched a new venture - Mr Porter – offering fashion clothing for men. How might the communication strategy vary if the target customers include both male and female? 7 Works Cited 10 Introduction The Net-A-Porter group is regarded as the world’s premier online luxury fashion retailer which was founded by Natalie Massenet, the former fashion editor at Tatler. Since its launch in the year 2000, the company Net-A-Porter have been able to successfully establish itself as a premium luxury brand selling online designer fashion clothing for women. Net-A-Porter with its innovation strategy along with highly developed offering have been able to achieve huge success and had also won award for the best shop at “British Fashion Week” and the best e-retailer in “UK Fashion Export Awards.” The online fashion retailer sells more than 150 top luxury fashionable brands and offers express delivery throughout the globe and delivery the items on the same day in Manhattan and London (Net-A-Porter, “About Us”). The paper aims to discuss the case study on Net-A-Porter and answer to some of its question in relation to the brand and its strategy. Therefore below are the answers to the questions asked for in the case study “Net-a-Porter.” What are the considerations that need to underpin decisions on the pricing strategy? Pricing is one of the 4ps that a marketer needs to take into consideration before deciding on the strategy. It is an important aspect of marketing and also for branding strategy as it tends to be one of the first indicators of brand positioning for the consumers and also regarded as the most flexible Ps. It has been seen that prestige and luxury brands adopts the premium pricing strategy in order to emphasise the strength of the brand, high quality associated with luxury goods which also helps them to differentiate from mass fashion brands. The target audience for the luxury brand are comparatively less price sensitive and actually expects that luxury products to be highly priced rather than to be priced economically. Pricing tends to form branding process as the consumer tends to judge the position of the respective brand and its value through the adopted pricing strategy. In addition, luxury brands are those brands whose ratio of functionality towards price is low and the ratio towards situational utility and intangibility with respect to price seems to be high. This indicates that price of premium products is relatively higher as compared to the price of products having similar kind of tangible features but with high intangible quality along with associated benefits of premium products teds to justify the high price (Okonkwo 140). In addition to the above consideration while deciding on the pricing strategy, Net-A-Porter is an online luxury brand and thus online pricing premium strategy is also a consideration for the brand. The premium pricing strategy involves setting a higher price as compared to similar products. The premium pricing strategy also referred to as skimming pricing strategy as it is an attempt to “skim the cream” from the market. Based on the above definition Net-A-Porter premium pricing strategy will help it to maximise profit in areas where the customers are willing to pay more for the desired product. In the process of adopting the premium pricing strategy, price quality signaling is also an important and essential factor. With the premium pricing strategy Net-A-Porter can use to improve its brand identity in the specific given market. The higher price the brand demands signifies highest quality product and thus it will be convenient for the brand to charge high price. The next consideration is the level of competition among the brands in the same product segment. Premium pricing is a short term strategy; the longer the brand is able to maintain its competitor advantage the longer Net-A-Porter will be able to charge a premium price from the target market. Premium pricing are also used to generate brand awareness but it needs to be traded as a public company or private business so that the business remains small and are able to use the premium pricing strategy. Net-A-Porter sells fashionable clothing along with accessories, bags, shoes and designer wears which makes the brand unique and as a result it has the privilege to demand premium prices. Therefore premium pricing strategy along with the considerations of adopting the premium pricing strategy enables the brand to earn high revenue and increased brand awareness. Similarly Net-A-Porter is also an online luxury brand selling premium fashion clothing and it can be said that the brand has adopted the premium pricing strategy. The premium pricing strategy targets the high end customers who are not price sensitive and are ready to pay any price for the product and its quality. Net-A-Porter through its online retailing has adopted the prestige pricing strategy and the main objective is to emphasis on profitability as well as on return on investment. This pricing objective should be adopted by Net-A-Porter because price differs in between economy pricing and premium pricing by at least 10 points and the profit margins are kept much higher. Based on the above consideration Net-A-Porter is said to adopt the “Extended Strategic Pricing Model.” This model indicates a low, medium and high level of pricing measurements in comparison to product quality and is said to be appropriate for luxury brands mainly in the current luxury market as offerings made from various other brands tends to feature gradual gravitation with respect to premium pricing towards medium pricing strategy. The pricing strategy includes an evaluation of all the key objectives with respect to the pricing strategy in order to determine the potential of success. The elements consist of pricing, feature of the target customer and its competitors. In case of luxury products the target customer generally accepts the premium pricing strategy which differentiates the product not only from the competitor’s product but also from its own product line (Rao 32). What are the advantages and disadvantages in establishing theoutnet.com as a discounted distribution channel? The Outnet.com is the most fashionable fashion outlet globally and is devoted in selling discounted designer wear along with accessories. It is designed for the most happening and fashionable people and is part of Net-A-Porter brand. The Outnet.com tends to stock a huge array of authentic designer looks (The Outlet, “About Us”). The Outnet.com acts as a discounted distribution channel for Net-A-Porter which serves both as advantages and disadvantage for the brand. The advantages of the Outlet.com to act as a discounted means of distribution channel is that despite of being premium product the site sells products at a discount attracting even the middle class people along with the higher end target customers generating more revenue. The outnet.com sells luxury brands like Christian Louboutin, Diane von Furstenberg along with Miu Miu and discounted the price by about 60% as a result 150,000 customers were reported to register even before the launch of the Outnet.com. When big brands are made available at a discounted price, consumers from various segments are bound to at least try or purchase once and experience the discounted pricing experience at the same quality but with reduced price. In short online discounted sites allow a consumer to look for high quality of product and purchase products at a discounted rate. The products which are sold in the discounted store are manufactured by well and known manufacturer and can be seen as another strategy to attract the target customers and generate revenue. Each and every discount provided by The Outlet.com has its own nature and are meant to cater to the various needs of the target market. Another related advantage of discounted distribution channel of ‘The Outlet.com’ is the store can customize itself as per the needs and demands and as Net-A-Porter has extended its business model to discounted distribution channel is likely to generate more footfall resulting in increase in sale volume in order to compensate for the reduced profit margin. The outlet store has allowed the premium brand to extend its target market resulting in more number of customers for the brand and contributing towards the development of the discounted distribution channel. However with advantages of online discounted store there also exist a number of disadvantages in operating as a discounted distribution channel. Firstly the target market might not like the concept of discounted store for the premium brands at about 60%. The high end customer’s marks premium products as luxury and a symbol of status for which they are ready to pay any amount charged for a product. Thus selling similar kind of product as discounted product might lead to change in perception about the brand and most likely shift from the current brand as it do not match the suitable status required by the customers. Secondly it tends to confuse the target market about the brand and what the brand sells. At one time the brand is offering luxury products at premium price and at the next moment at discounted price, leaving the target market confused. Thus high end consumers might not like the concept of discounted store at The Outlet.com a branch of Net-A-Porter and might shift in from the brand resulting in lower profits and revenue in the long run. Net-a-Porter launched a new venture - Mr Porter – offering fashion clothing for men. How might the communication strategy vary if the target customers include both male and female? Recently Net-A-Porter had launched menswear site in 2011 and named it Mr Porter which aims to offer the discerning shoppers a wide range of global designer and a niche specialist brand. Analysing the market opportunity for the men section, the company decided to launch Mr Porter and build a new customer base for ‘super stylish’ men who would purchase the product. Since the brad has included both men and female as its target market thus the communication strategy tends to differ from that of the previous which had only women as the target market. Communication is an act of sending information from one person to another; it is an interpersonal activity (Smith, et al 20). Communication strategies are a way through which organisation chose to communicate with its target customers and other stakeholders. Marketing communication strategies tends to include sub strategies which are based on marketing communication tool such as advertising strategies, public relation strategies, media strategy and others. Marketing communication should be customer oriented and not just media oriented (Egan 116). The communication strategy would vary to a certain extend when the target market for Net-A-Porter include both male and female as its target market. The mode of communication varies from male to females and especially when the brand after focusing entirely on the female section has included male as a part of its marketing strategy. Mr Porter which aims to build super stylish range of clothing for men needs to focus entirely on its communication strategy attracting not only the men but also retain the women. The brand can introduce new site for the men and showcase all the branded and designer wear as it is in the original site depicting women wear. Since the brand emphasis more on online marketing the communication strategy should also focus through online marketing mainly through social media sites like Facebook and Twitter. The main aim was to serve the ignored sector in the luxury market segment. Since men are very less likely to browse through the sites as compared to the women so the loyalty are high in case of men (Taneja 7). Men tend to use the internet mainly for the purpose of entertainment like broadcast of audio, web pages, search related to products and also online games. In comparison to men, women use the internet primarily for interpersonal communication and tend to relay on features like e mail and chatting. It has also been reported that there are high chances of men shopping through the internet are high as compared to women. Advertising research has suggested that both men and women differ in the affective and cognitive needs. Men exhibit a superior need for cognition and women for emotional needs (McMahan, Hovland & McMillan 65). Based on the analysis communication strategy should concentrate both towards cognitive and emotional needs. Net-A-Porter thus will induce emotional advertisement jus to capture and retain back its target market and more knowledgeable and judgemental advertisement for the male segment. In addition to it, as a part of its communication strategy Net-A-Porter can create application for smart phones which will alert the target market about everything new happening with the brand, new launches, new arrivals everything. The male segment of the target market is likely to be in touch with the applications and this would help them to know about the happenings taking place with the brand Net-A-Porter. Beside the female segment are also keen on handling technology and thus this will not only be beneficial for the male segment but also for the female segment of the target market. Thus this strategy is likely to involve both the target market. Along with communication tools like advertising via online sites, the brand can also include personal selling like point of sale promotion like price off coupons and also direct marketing such as word of mouth. Word of mouth is one of the most effective promotional or communication tools that a market can use in order to generate brand awareness about its product. Therefore it can be said that communication plays an important and essential role in the success for any brand and thus he communication strategy should be chosen accordingly based on the target market. The media selection is also essential. Net-A-Porter will thus advertisement its new launch, Mr Porter through internet advertisement similar to that of previous communication strategy but with more judgmental and knowledgeable features as the men tends to be cognitive in nature and not emotional. Women are much more emotionally oriented than men which help to analyse the consumer behaviour pattern. Women are motivated by social and emotional factors while shopping online and men are highly motivated by functional factors such as making purchase efficiently and quickly. Women also has expressed experiential need to feel, see and touch the product before purchasing it and in some cases has also reported the lack of experiential and emotional dimension in online shopping. Therefore the marketers should just not consider perception and thoughts but also emotional factor as it tends to influence consumer behaviour to a very high extend. And it can be concluded that Net-A-Porter should communicate with different strategy for the both the segments as both tends to differ in many cases as discussed above. Works Cited Egan, John. Marketing Communications. UK: Cengage Learning EMEA, 2007. Print. McMahan, Carolynn, Hovland, Roxanne and Sally McMillan. “Online Marketing Communications: Exploring Online Consumer Behaviour by Examining Gender Differences And Interactivity Within Internet Advertising.” Journal of Interactive Advertising 10 (1) (2009) 61-76. Print. Net-A-Porter. “About Us.” Net-A-Porter, 2012. Web. 26 Nov. 12 http://www.net-a-porter.com/About-Us/Our-Company Okonkwo, Uche. Luxury Fashion Branding: Trends, Tactics, Techniques. New York: Palgrave Macmillan, 2007. Print. Rao, Vithala R. Handbook of Pricing Research in Marketing. UK: Edward Elgar Publishing, 2009. Print. Taneja, Nandini. “A finger in every pie.” Net-A-Porter.Com, 2011. Web. 27 November 2012 http://www.econ.ucla.edu/sboard/teaching/tech/Net-a-porter.pdf The Outlet. “About Us.” The Outlet.com, 2012. Web. 26 November 2012 http://www.theoutnet.com/aboutus Read More