Pricing Strategy and Channel Distribution
Pricing Strategy and Channel Distribution Senior Concierge Services Kelly Spino Strayer University Dr. Robert Badowski Abstract Determine and discuss a pricing strategy (penetration or skimming). Determine and discuss pricing tactics (product line pricing, value pricing, differential pricing, or competing against private brands) to be used for your product. Identify any legal and ethical issues related to the pricing tactics. Prepare a marketing distribution channel analysis identifying the wholesaler, distributor, and retailer relationships.
Discuss how the distribution strategy fits the product/service, target market, and overall marketing objectives for the company. As a service business, Senior Concierge Service will offer non medical care and maintenance for senior citizens and their families. This type of service business does not have many competitors, and pricing is consistent among the senior care industry. The pricing strategy for Senior Concierge Service will be to stay within the normal range for its services.
Consumers will choose Senior Concierge Service over the competition not by cost, but by the quality of services offered. Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, and then the price is lowered over time. This is a version of price discrimination. Price skimming allows a business to recover its resources quickly before a competitor moves in and lowers their prices, lowering the market price. The objective of a price skimming strategy is to capture the consumer surplus. There are several potential problems with this strategy.
It is effective only when a business is facing an inelastic demand curve (demand that is not very sensitive to a change in price). Skimming encourages the entry of competitors. Penetration pricing is a more suitable strategy in this case. This strategy is a pricing technique of setting a relatively low initial entry price, often lower than the market price, to attract new customers. This strategy works on the probability that customers will switch to the new business because of the lower price. Penetration pricing is most commonly associated with a marketing objective of increasing market hare or sales volume, rather than to make profit in the short term. This can take the competition by surprise, not giving them time to react. It can also create goodwill among the early customer segment. This can create more trade through word of mouth. Ethical thinking is responding to situations that deal with principles concerning human behavior in respect to the appropriateness and inappropriateness of certain communication and to the decency and indecency of the intention and results of such actions (distinctions between right and wrong).
Marketers are ethically responsible for what is marketed and the image that a product portrays. Marketers need to understand what good ethics are and how to incorporate good ethics in various marketing campaigns to better reach a targeted audience and to gain trust from customers. (Wikipedia. com) Unethical or controversial marketing strategies include: bait and switch, pyramid scheme, planned obsolescence, lock-in/ loyalty schemes, viral marketing, and, monopolies/oligopolies.
In retail sales, a bait and switch is a form of fraud in which the party putting forth the fraud lures in customers by advertising a product or service at an unprofitably low price, and then reveals to potential customers that the advertised good is not available but that a substitute is. A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered. Pyramid schemes are a form of fraud.
The scheme collapses when no more people are willing to join the pyramid Planned obsolescence is the process of a product becoming obsolete or non-functional after a certain period or amount of use in a way that is planned or designed by the manufacturer. The purpose of planned obsolescence is to hide the real cost per use from the consumer, and charge a higher price than they would otherwise be willing to pay, or would be unwilling to spend all at once. For industries, planned obsolescence stimulates demand by encouraging purchasers to buy sooner if they still want a functioning product.
In business, vendor lock-in or customer lock-in, makes a customer dependent on a vendor for products and services, unable to use another vendor without substantial switching costs. Lock-in costs which create barriers to market entry may result in antitrust action against a monopoly. Loyalty programs include frequent flier miles or points systems associated with credit card offers that can be used only with the original company, creating a perceived loss or cost when switching to a competitor.
Most programs are able to get consumers to spend more money just to get to free or bonus item. Viral marketing and viral advertising refer to marketing techniques that use pre-existing social networks to produce increases in brand awareness. It can be word-of-mouth delivered or enhanced by the network effects of the Internet. Monopolies and oligopolies often use anti-competitive practices, which can have a negative impact on the economy. This is why company mergers are often examined closely by government regulators to avoid reducing competition in an industry.
Since this business caters to seniors and their families, it is especially important for Senior Concierge Services to represent quality, value and confidence in its services and staff. The success of this company depends on compassionate, trustworthy, conscientious, and ethical care givers providing non-medical in-home care. A different take on the loyalty program would allow customers to receive a discount after x amount of service visits or when prepaying for multiple services. A marketing distribution channel analysis is a means used to transfer merchandise from the manufacturer to the end user.
An intermediary in the channel is called a middleman. Channels normally range from two-level channels without intermediaries to five-level channels with three intermediaries. Intermediaries in the channel of distribution are used to facilitate the delivery of the merchandise as well as to transfer title, payments, and information about the merchandise. Distribution describes all the logistics involved in delivering a company’s products or services to the right place, at the right time, for the lowest cost. For many products and services, their manufacturers or providers use multiple channels of distribution.
Well-chosen channels constitute a significant competitive advantage, while poorly conceived or chosen channels can doom even a superior product or service to failure in the market. Distribution channels may not be restricted to physical products alone. They may be just as important for moving a service from producer to consumer in certain sectors, since both direct and indirect channels may be used. There have also been some innovations in the distribution of services, such as an increase in franchising and in rental services. There has also been some indication hat service integration can benefit many providers. Senior Concierge Services will look to link with other service providers to create a mutually beneficial arrangement. Medical providers, beauticians, landscapers and general contractors would all be a good fit with the services offered. A distribution strategy defines how a business is going to create and satisfy demand for its products; how a business is going to move products from point of creation to points of consumption, in a cost-effective manner; as well as defining how a business is going to manage its brand.
Today’s customers shop and buy very differently than ever before. Access to high-quality information, via the internet, combined with their heightened price sensitivity, has created customers that are more sophisticated, better informed and often times, more demanding than customers of the past. A distribution strategy must be in sync with how the customers of Senior Concierge Service want to shop for services. Franchising is an option worth considering. For a fee, a small business owner can take advantage of the marketing research completed at the corporate level.