Pricing Strategy and Channel Distribution - Essay Example

? Pricing Strategy and Channel Distribution Pricing Strategy and Channel Distribution The of the company under discussion in this paper is Hall Detergents and the product is hall-washing powder. The company is seeking to introduce its brand-new product into the market and to carry out a market research on the demand of detergents. This research will have to analyze the wants and needs of the customers to facilitate penetration as a pricing strategy. According to Armstrong and Kotler (2008), market penetration is a strategy used by companies that are growing. The main reasons as to why the company in the question chooses market penetration are that this strategy increases sales and reduces the risks involved in the new market. Market penetration pricing strategy will introduce Hall detergent at a lower price than the other detergents already existing in the market. The introduced products will come in different packages, each of which will have its price depending on the amounts packaged. The company is aware that it is exploring a competitive market segment where lowering prices at the entry stage will enable the company to acquire its own market niche. Once the detergent has gained a significant share of the market, the company will pursue other strategies and reduce prices accordingly. Market penetration is going to attract people who have never used the detergent before. The company aims at attracting new customers to use Hall detergent for their daily household activities such as washing and cleaning. The penetration pricing strategy will help the company to create a high market share for the new detergent. By using market penetration strategy, the company is going to create the presence of its products in the consumers’ mind. This pricing strategy will create goodwill for the brand name of the detergent and will consequently make them positively attached to the product for a long time. The strategy will create a room for cost reduction and control right from the initial manufacturing stage to the end user. The increase in cost controls will help the company to increase profit margins throughout the channels of distribution and gain a competitive advantage against other companies manufacturing detergents. The tactics that the company is going to adopt in penetration pricing will include price competition and value pricing. The company will employ competitive pricing strategy tactic to penetrate the market already occupied by other players, as well as to set pieces according to the prices of similar detergents in the market. The competitive tactic is aimed at creating a distinction for the Halls detergent from the other detergents in the market. The Hall detergent is going to have a lower cross price elasticity as well as price elasticity, which will increase the demand for the detergent. Competition pricing strategy will create a room for the customers to explore the features of the hall detergent. This product has been made of high quality ingredients to ensure that cleaning becomes a fun activity. The effortless usage of the Hall detergents is the main feature that the company seeks to market using penetration and competition pricing strategies. The competitive pricing strategy will give the customers the right to choose between varieties of products as the company has a chance of displaying their products with high quality features at a lower price. In competition pricing strategy, a seller offers low products produced with low costs. However, the company will not use less quality ingredients in its bid to sell products at a lower price or control prices. The company will produce the Hall detergent with strict quality control and assurance. Once the product has gained its market share, the company will employ a value based pricing tactic. According to Boone and Kurtz (2010), value based pricing tactic will compare the quality and prices of the competing products in the market. The strategy will only work for goods that that are relatively low priced. Value based pricing aims at offering quality products at lower prices to attract and retain customers. This strategy will challenge the competing brands in the market and create a room for exploration by the customers of the Hall detergent. The main challenge that the company will face using the value based pricing tactic is to convince the customers that the Hall detergent is of superior quality over other detergent brands or other privately labeled alternative brands. Pricing strategies are of great significance in marketing as they create business for the company or lead to the ultimate failure of a company. In most cases, companies have to spend money and time to defend their lawsuits that often cripple business activities. The main pricing ethics that affect the company are mainly based in the pursuit of the company for higher profits and market share. The actions of the company in pursuit of more profits and market share can affect the decisions that the company will make at the expense of the consumers, suppliers, and employees at large. The labor costs taken to manufacture a product may be favorable or unfavorable in the bid for the company to reduce costs and gain more returns. Some pricing strategies are unethical and normally involve raising the items price to unimaginable heights. For example, a company can raise the prices of its products when the demand for their products is high. On the other hand, some companies can offer such low prices that the low prices lower the demand for other goods or services. Predatory pricing has been known in business to cause low demand for other goods and services offering similar products and it has become an ethical issue in the world of business. Another pricing strategy that has been an ethical issue is the pricing strategies taken by monopoly companies. Monopoly companies can manipulated prices the way they want because they know that consumers do not have another alternative to their products. As for pricing, some companies advertise goods for their worth only for the customers to find out that they have been duped into buying unworthy products. Even though the customers cannot sue the company for attention to offer; it is unethical to call for the customers to buy a product that does not match its price. The main legal issues involved in pricing strategies and tactics presuppose making profits that fit the legal framework of country systems. It is the legal responsibility of companies to make profits that are not generated by exploiting customers. The companies in their day to day activities must abide by the laws and customs of the society used to govern profit making. In international marketing there are regulations that control pricing. Channels of Marketing The company is going to use a marketing channel that best suits the marketing objectives of the company. The channel the company is going to adopt will be based on the ability of the channel to identify threats and opportunities in the market, as well as determining the attractiveness of the market. The market channel that the company has chosen will be able to accommodate the four Ps of marketing mix known as Promotion, Place, Price and Product, as well as the legal and ethical issues in marketing. The company is going to operate on a four level distribution channel (Nijssen & Frambach, 2001). The market channel that the company will use is from manufacturer to wholesalers to retailers and finally to customers. In terms of pricing, the retailers and the wholesalers are experts in determining prices because they know the prices batter than the manufacturer. The retailers and wholesalers will set forth the customers profile for further analysis by the company. It is important for the company to foster a healthy relationship between the retailers and the wholesalers in order to be able to gather as much information from them as quickly as possible. This channel will ensure that the detergent is moved from the business to consumers in a timely and reliable manner. The main reasons for the company to choose the above-mentioned distribution channel is that it will ensure the detergent has penetrated the market fully. The retailers will act as agents for the company to advertise the detergent to the consumers. The main marketing objectives of the company are to address the market competition and determine pricing strategies that will work for the introduction of the Hall detergent. The other marketing objectives of the company are to gain competitive advantage over the rivals and attract and retain customers. The four level distribution channels fit the pricing and distribution of the detergent because the consumers will have the final say on the quality and prices of the detergent (Nijssen & Frambach, 2001). The four level distribution channels will ensure that the marketer gathers information sufficient to make the organization the leader in the detergents market by analyzing and implementing strategies to be used in the market. These channels will help the company to determine the best channel of distribution that will enable it to accomplish and achieve the marketing goals and objectives such as discounts. The company will not want to sell personally to the customers but will use the services of retailers to inform the consumers about the Hall detergent. The engagement of retailers for direct sales strategy will cut the operating costs as opposed to personal selling. The four level distribution channels will further ensure efficiency and easier attraction of customers because the channel touches on all the classes of consumer economy. In conclusion, if the company aims at succeeding with its new product at the market, it must take into consideration pricing systems. This will require the company to look into all factors that affect pricing either directly and indirectly and accommodate all of them in the selected strategy. References Armstrong, G., and Kotler, P. (2008). Marketing: An Introduction. Upper Saddle River, NJ: Pearson Prentice Hall Publishers. Boone, L., and Kurtz, L .D. (2010). Contemporary Business 2010 Update. Hoboken, NJ: John Wiley &Sons Publishers Inc. Nijssen, J.E., and Frambach, T. (2001).Creating Customer Value through Strategic Marketing Planning: A Management Approach. Dordrecht: Kluwer Academic Publishers. Read More