The Marketing Manager in Mercedes I - Case Study Example

FACTORS YOUR SELECTED COMPANY WILL CONSIDER IN DETERMINING ITS PRICING AND DISTRIBUTION (PLACE) MARKETING MIX STRATEGIES TABLE OF CONTENTS 0- Introduction……………………………………………………………………………....3 2.0- Pricing Marketing mix…………………………………………………………………..3 2.1 Purchasing power……………………………………………………………………4 2.2 Company’s pricing Objectives……………………………………………………..4 2.3 Available pricing strategies…………………............................................................4 2.4 Ability to differentiate the product…………………………………………5 2.5 Level of competition………………………………………………………..6 3.0- Distribution or Place Marketing Mix…………………………………………………...6 3.1 Distribution networks available…………………………………………………….7 3.2 Sales and distribution components………………………………………………….7 3.3 Control of distribution channels…………………………………………………….8 3.4 Market characteristics……………………………………………………………….8 4.0- Justification of the strategies above…………………………………………………….9 4.2 Marketing mix components…………………………………………………………9 Conclusion………………………………………………………………………………………11 References………………………………………………………………………………………12 To: Managing Director From: Marketing Manager Date: 28th August 2014 Subject: Factors Determining Price and Distribution Marketing Mix 1.0- Introduction As the Marketing Manager in Mercedes I prepare this report to on the request of the marketing director to discuss factors that would influence the pricing marketing and distribution (place) mix as the firm ventures into the Ukrainian market. The Ukrainian market is a tricky one to venture into because of the low purchasing power of the population in this country: verses the high cost of production of the product that the company has to offer which in this case is a Mercedes Benz product. The success of the operations of Mercedes in the Ukrainian market will therefore all depend on the marketing mix that the company decides to use. Our company will need to highly consider each of the four components that are:- Product- This is what the customers want: we sell automobile products Price- This is the value of the product to the buyer Place- This is where the buyers would rather look for the products. Promotion- This involves sales and sales promotions Most specifically important will be the way our sales team will handle the price of the product and distribution. The product and its aspects such as differentiation and the promotional mix that will be employed will in the end support these (Ayal & Zif 2009). 2.0- Pricing Marketing mix Pricing will play a major roles and it will largely determine the possibility that Mercedes Benz will be able to penetrate this market. This depends on factors such as:- 2.1 Purchasing power As compared to the UK Ukraine is an emerging market characterized by a few rich individuals with the majority being poor. This means that the purchasing power of the population is low and with higher prices, they are not likely to purchase a product (Michman & Mazze 2006). Price is therefore a very important part of our marketing mix and depending on how we price: we will be likely to maximize our profits or not. With welcoming prices, a strong relationship is also likely to be built with the customers, which will ensure our longer presence in the market (Krafft 2007). In addition, fair or good pricing has the impact of making the company avoid serious financial consequences such as low profits if we price too low and less sales in the event the pricing is too high. 2.2 Company’s pricing Objectives For our company, pricing is as well important since we are making an international marketing decision as this has the impact of helping our company generate cash and ensure we survive as well (Roy & Henry 2005). Price gives prospective clients varied perception given that some may view high prices to mean quality as others view such prices as expensive and unaffordable. 2.3 Available pricing strategies The company should therefore consider pricing strategies ranging from as they apply to the kind of market that Ukraine belongs: Premium and penetration pricing, Economy and psychological pricing, Geographical and value pricing or even Price skimming This is necessitated by the fact that it is quite difficult setting prices for international markets as decisions as to product, price and distribution for international markets is special to each country. The firm should first determine how suitable it is to invest in Ukraine as opposed to expanding the same operations in the local market. 2.4 Ability to differentiate the product After analyzing what the market demands, the firm will develop or differentiate the product in such a manner that they are specific to the demands of the target market. Mercedes is a global brand and that would even be reason enough to venture into the Ukrainian Market. Economy pricing- For this market, the company will produce the products directed here at a lower production cost and as well try to minimize the promotion costs: this prompts the first pricing strategy to be considered as the economy pricing (Krafft 2007). Low price strategy- At the beginning, the company will have to use the penetration or low price strategy to help it grab the market share quickly through quick penetration. This as well has the impact of broadening the customer base and makes the relationship much stronger. Under, this strategy, the prices may be adjusted upwards much later after the company has proved its worth to the already attracted customer clientele (Taylor & Jelen 2006). This strategy has the challenge that the customers may view the goods as below quality. It may also be impractical for prices to be adjusted upwards in future and retain the customers given the extremely competitive environment (Roy & Henry 2005). 2.5 Level of competition The best pricing will be that set after considering the competitors prices so that the price set is not too high or too low but at par with that of the competitors. Therefore, it is a fact that pricing poses a serious challenge and a company is not able to depend on only one pricing strategy. Customer needs-The sales force will therefore have to be on the ground and find out what exactly the customers want: and thereafter the price at which they are willing to accept such a product. This will go a long way in helping the company set appropriate production costs and the profit that the business needs to make from the market to break even (Michman & Mazze 2006). Competitor’s costs, the demand, and the competition- As opposed to local market where the company can set prices without considering the competitors prices, foreign markets like Ukraine are much different and the so many competitors play a critical role. Penetrating the Ukrainian market is therefore quite challenging hence the need for a shrewd marketing strategy (Pride 2011). We will ensure that we list down the strategies we intend to apply, know our products for each market, and understand the environmental factors of Ukraine. 3.0- Distribution or Place Marketing Mix The second most successful factor that is likely to ensure success or the failure of our product in the new market is the distribution strategy or otherwise called under the four P’s as the place. This strategy refers to the ways in which the product will reach the consumer in the event that the pricing and the other factors are successful so that demand is created. This is also referred to as the location where the consumers will be able to find the product (Krafft 2007). 3.1 Distribution networks available Mercedes will need to find out the distribution network within Ukraine as each country posses a unique distribution network and structure. Such a research will make it easier for the company to easily penetrate the probably existing distribution layers and conditions. In addition, the company will be in the position to build an exemplarily efficient and effective distribution channel hence create a competitive advantage over the other competitors (Roy & Henry 2005). 3.2 Sales and distribution components The sales force should at any point assume that the distribution channel is the same as that in the UK. This is because of factors such as size patterns, direct marketing use and the resistances to change all have an impact on the composition of the distribution channel (Pride 2011). Most underdeveloped countries present extreme challenges when it comes to distribution and a global marketer should weigh all the costs and benefits of using any given form of distribution channel in a foreign market. Direct marketing- Mercedes Benz in Ukraine should hence consider its first means of distribution as direct marketing (Michman & Mazze 2006). They will do this by approaching the consumers in a number of ways including through mail, email, or door to door and even the use of catalogues, which has ensured success for most companies entering a foreign market (Taylor & Jelen 2006). 3.3 Control of distribution channels The company is also advised to take control of the distribution channel always through the establishment of subsidiaries in their foreign countries of operations. Control depends on:- From of marketing used- Control is also possible through direct marketing to the end user. Number of middlemen- It also depends on one or more intermediaries in ensuring that the products are distributed. 3.4 Market characteristics Therefore, before a decision is made on the choice of a distribution method to be used, the international market representative will have to understand the characteristics of the Ukraine market (Roy & Henry 2005). Commonly used channels- He or she will also need to understand and establish the commonly used system of distribution in Ukraine. Specific target market- This is all dependent on the specific target market in the region to be penetrated, the goals of the firm in terms of sales volume, market share penetration and the targeted profit. 3.5 Company’s strategic objective The next consideration is strategic in that it involves making an enquiry on the commitment of the company in developing international distribution. Furthermore, the firm will have to determine the extent of control it will have on the channel chosen (Pride 2011). 4.0- Justification of the strategies above 4.1 The company’s geographical Coverage Mercedes Benz is a real working company with subsidiaries all over the world one of which is our own in the UK. The company has in the past employed marketing mix strategies in its operations and it is another time such strategies are required to aid its entry into the Ukraine market. Challenge- Despite the fact that Mercedes Benz is a global brand and hence ease in acceptability across, there is normally a challenge most so when it requires to venture into a growing economy. Our company is well interconnected with its major operations being in automobiles. It is highly regarded when it comes to quality and luxury brand of vehicles. Strategy- As part of its marketing strategy, the company reiterates the fact that quality is paramount irrespective of the production costs. Pricing of our products therefore mostly depend on both the model whether luxury or normal use verses the quality of the brand (Murphy & Laczniak 2012).Quality strategies and fair pricing which depends on the market has ensured that the company is highly regarded most so among the huge global automobile dealers. 4.2 Marketing mix components The primary element in the company’s product mix is the: Product itself- In this regards, Mercedes is known for the quality of its products and this as well emanates from its German cultural backing (Taylor & Jelen 2006). The products are as well diversified into several classes of Mercedes cars, tracks, sports cars and even vans. The company products come with a lot of benefits ranging from fuel economies of the models and appeal in terms of designs and shapes (Payne & Frow 2013). It is the quality, effectiveness and efficiency of the Mercedes automobile that helps it create a good relationship with its customers. Through market segmentation, the company has the ability of ensuring market penetration because they are able to determine the specific needs of each and every customer and provide the exact products as required by such customers (Pelsmacker, Geuens & Bergh 2004). Pricing- has been talked about a lot but still it is the most crucial of all as it will dictate the important parameters such as sales revenue hence profitability. The pricing policy to be adopted in Ukraine of affordability by the consumer would have the resultant impact of ensuring penetration, increased revenue and a boost on profitability. The pricing strategy adopted can be said to be consumer oriented as it gives a consideration to the financial capability of the target market (Murphy & Laczniak 2012). The strategy employed for place and distribution is directed to ascertain that the consumer does not miss a product when they need it. This is ensured by way of direct marketing and locating their supply networks in areas where the prospective consumers are able to get the products when they require them. The products are supplied at the right places at the right time and this is due to the efficiency of the supply chain (Payne & Frow 2013). Promotion- The extensive promotion strategy through several avenues has made it sure that the company customers are able to know about the company products in whatever place they are. As a way of promoting the company vehicles, the company is involved in a coordination of extensive marketing campaigns (Palda 2001). In addition, they conduct demonstrations of its motor vehicles as part of such a strategy. The company also gives its customer low interest rates when they are involved in installment transactions. Therefore, marketing mix is a vital part of the penetration strategy of Mercedes Benz into the Ukraine market. Conclusion Through and quick implementations of the components of the marketing mix has made the company realize effective and efficient marketing strategies into a foreign market. As a result the company has developed good corporate image hence good customer relationships with the eventuality being a constant and progressive increase in profitability (Taylor & Jelen 2006). To ensure the same level of success in the future operations, the company must continue handling their customers well through improved means of the marketing mix strategies. References Ayal, I., & Zif, J., 2009, Market Expansion Strategies in Multinational Marketing, Journal of Marketing, 43(2), 84. Krafft, M., 2007, International direct marketing principles, best practices, marketing facts, Springer: Berlin. Michman, R.D., & Mazze, E.M., 2006, The affluent consumer: marketing and selling the luxury lifestyle, Praeger Publishers: Westport, Conn. Murphy, P. E., & Laczniak, E. R., 2012, Ethics in marketing: international cases and perspectives, Abingdon, Oxon: Routledge. Palda, K. S., 2001, Pricing decisions and marketing policy, Prentice-Hall: Englewood Cliffs, N.J. Payne, A., & Frow, P., 2013, Strategic customer management integrating relationship marketing and CRM, Cambridge University Press: Cambridge, UK. Pelsmacker, P.D., Geuens, M., & Bergh, J.V., 2004, Marketing communications a European perspective (2nd ed.), Financial Times Prentice Hall: Harlow. Pride, W.M., 2011, Marketing principles, Cengage Learning: South Melbourne, Vic. Roy, A., & Henry, W., 2005, Special issue on Pricing Strategy and the Marketing Mix, Journal of Business Research, 33(3), 183-185. Taylor, I., & Jelen, B., 2006, Excel for marketing managers, Holy Macro! Books: Uniontown, Ohio. Read More