Pricing Strategy and Distribution Strategy - Assignment Example

 Pricing Strategy & Distribution Strategy Introduction Pricing of the product is another important factor which determines the success and failure of the new product in the market. Competitive and affordable price will always help a new product to move well in the market. Sexual pleasure is a psychological need for all the human beings irrespective of male or female and young or adult. Virtual sex software is a new entry to the market and a reasonable and competitive price would help the product to attract the customers. Another important factor which controls the success of a product is the distribution strategy. The product manufacturers should make sure that the customers are getting the product without any time delay. This paper analyses the pricing and distributions strategies of the new product; virtual sex software. Pricing Strategy The product manufacturers should estimate likely selling price based upon competition and customer feedback before fixing the actual selling price. The actual selling price should be adjusted after getting the feedback from the market. Penetration and skimming are the normal pricing strategies adopted by the product manufacturers when they introduce their new product into the market Penetration is a pricing strategy in which the manufacturers set a low price for the product in order to attract the customers. This type of pricing strategy helps the manufactures to increase the sales volume even though the profit margin is less. Skimming is another pricing strategy in which the price of the new product set high for a considerable period of time. Higher price will help the manufacturers to get more profit even if the sales volume becomes less. The decision between skimming and penetration pricing depends on the type of product and involves trade-offs of price versus volume. Skimming pricing results in much slower acceptance of a new product, but higher unit profits. Penetration pricing results in greater initial sales volume, but lower unit profits (Penetration pricing, 2010). Skimming pricing strategies can be a better option for the virtual sex software. Since no major competitors are there in the market for the virtual sex software, this strategy may help the product manufacturers to earn more profit. Because of the probability of high demand, the sales volume also may not affect much by the skimming strategies. Price Tactics Pricing tactics may include Product line pricing, Value pricing, Differential pricing etc. Product line pricing is the tactics of setting same prices for a wide range of products of same line or class. Virtual sex software can be modified based on the demands of the customers. Customers may have different types of demands with respect to their sexual pleasure and the virtual sex software developers can develop different types of software for catering the diverse sexual needs of the customers and still they can keep same price for all such variety of products. Value pricing is the best pricing tactics for the virtual sex software. In this type of pricing tactics, the customer perception of the product is taken into the account rather than the actual cost of the product, the market price, or the competitor’s prices. Virtual sex software has every chance to create immense value among the sexually disabled or teenage community because of the barriers for them in having free sex with others. So they may incorporate higher value to this product in their life which can be exploited by the product developers. Differential pricing strategy is another option for virtual sex software developers. It is a pricing method in which the same product may have different prices based on the type of customers, quantity ordered, delivery time, payment terms etc. For example, some customers may order more than one unit of the product and in such cases; the unit price can be reduced based on the number of the units ordered. Some customers may pay cash on delivery of the product whereas some others may opt for the credit facilities. In all such cases, the prices can be varied. Legal and ethical issues related to the pricing tactics Different countries have different laws with respect to the setting of prices to a new product. It is not possible that a seller can set much higher or lower prices for his product. Higher prices will always exploit the customers whereas the unreasonably lower prices are aimed at eliminating the competitors. So in many countries, nobody can set unrealistic prices for their products. Virtual sex software is relatively a new product and it is difficult to judge the legal prices of this product because of the immense value it provides to the sexual life of the sexually disabled persons. So the virtual sex software product developers can set a reasonably higher price for their product and can still escape from the legal hazards. The major ethical considerations related to pricing strategies of virtual sex software include issues of potential exploitation, impact and fairness of public shame tactics (DEVELOPING SOCIAL MARKETING STRATEGIES, n. d, p.238). It can be argued that the virtual sex software developers are exploiting the weakness of customers for making money. The sexually disabled personas have no options left for their sexual life and their weakness to engage in sexual activities is exploited by the virtual sex software developers. Moreover, such people are ashamed of revealing their disability publicly and they rely private means to satisfy their sexual requirements. Marketing distribution channel Since virtual sex software is a computer related product, it can be marketed with the help of computer or software dealers. Moreover, direct marketing can also be considered by the product developers. Orders for the product can be taken using an ecommerce website and the CD’s containing the software can be despatched directly to the customers with instructions. Moreover, such direct customers can get instructions about the usage of the product through the website itself. Even though direct marketing is an option for the virtual sex software marketing, it is impossible to achieve the targets based on direct marketing alone. The assistance of wholesaler, distributor and retailer etc are essential for the successful distribution and marketing of any product. Cole (2007) has argued that the wholesale distributor buys from the manufacturer at the lowest price obtainable through compromise and long-time exchange after stiff bargaining and negotiations (Cole, 2007). Compared to the manufacturers, the bargaining power of the wholesaler or distributer will be more as they are responsible for giving incentives to the retailers and the customers in order to boost the selling of the product. Wholesalers or distributors need the support of retailers and the retailers need the support of the customers in order to market the product properly. In other words, the relationships between the customers, retailers, distributors, wholesalers and the product manufacturers are important in ensuring the success of the product in the market. Distribution Strategy The distribution strategies are mainly related to the market factors, manufacturer factors and the product factors. In this case, the product is virtual sex software which is first in the market of similar kind. Moreover this product is targeted mainly the sexually disabled people and the young community. Buyer behaviour is an important market factor which can influence the distribution strategy. As mentioned earlier, most of the people want to keep their sexual life as a private matter and may go for the e commerce websites for purchasing this product rather than purchasing it from the shops. Since this product is software, it can be distributed along with every computer purchase as a free offer to the needy people. For such marketing, proper agreements should be reached with the computer sellers and the virtual sex software developers. Conclusions Virtual sex software pricing and distribution strategies must be carefully planned in order to market the product more effectively. Skimming pricing strategy seems to be more appropriate for this product whereas direct marketing with the help of an ecommerce website seems to be the better marketing channels for this product. References 1. Cole (2007), Develop a Good Relationship With Your Wholesale Distributor, Retrieved on 13 May 2010 from http://wholesale-distributor1.blogspot.com/ 2. DEVELOPING SOCIAL MARKETING STRATEGIES, (n. d), Retrieved on 13 May 2010 from http://www.sagepub.com/upm-data/19320_graphic_illustrations_of_actual_social_marketing_campaigns.pdf 3. Penetration pricing, (2010), Retrieved on 13 May 2010 from http://www.referenceforbusiness.com/small/Op-Qu/Penetration-Pricing.html Read More