Module 6 - Optimising Accessibility, Value and Reach

Outline the first internal factor influencing pricing strategies

Strategic objectives:

• Maximise profit, increase of maintain market share

• Brand positioning - price signals quality to customers

Outline the second internal factor influencing pricing strategies

Product-specific factors

• Pricing strategy often depends on the specific stage of the product life-cycle the product is in:

  1. Introduction

     1. Price skimming: prices set high during product innovation - to recover R&D costs

     2. Penetration pricing: prices are set low during product introduction when rapid adoption and market acceptance is wanted

  2. Growth & maturity

     1. reduce prices: defensive or offensive

     2. Maintain price: status-quo pricing: generally adopted in markets with strong competition to avoid disrupting market

     3. Increase prices: in response to external factors, eg.g. inflation

Outline the components of pricing power

Meaningful differentiation

• addressing the functional and emotions needs to customers

Salience

• how easily a brand comes to mind during a purchase decision

Differentiation

• Perceived to be leading the way

• offer something to value that other brands don’t

Outline the third internal factor influencing pricing strategies

Marketing costs

• costs involved with other elements of the marketing mix, costs involved with producing, distributing, and a promotion of a prodcut

Fixed costs:

• remain same regardless of production output - e.g. rent and advertising

Variable costs

• fluctuates directly with production or sales volume, e.g raw material, packaging

Outline the first external factor influencing pricing strategies

Market factos

• economic conditions: e.g. discretionary incomes

• Government regulations

• technological environment - e.g introduction of netlix v blockbuster

Outline the second external factor influencing pricing strategies

Competitive landscape

• level of competition: number of direct competitors, availability of substitutes

Outline the third external factor influencing pricing strategies

Customer-specific factors

• Segment characteristics

• customer acceptable (expected) price range

• brand loyalty

How do you calculate CLV

CV x Avg customer lifespan

Example:

A customer spends $50 per purchase, buys 4 times a year and remains a customer for 3 years:

50×4 is 200 and then x3 is $600

Name 4 types of pricing tactics

1. pricing structure tactics (product bundling, product line, optional-product, captive product)

2. physiological tactics

3. promotional pricing tactics

4. dynamic and flexible pricing method

Name the first type of the distribution scope strategies

Intensive distribution

• goal is to make the product as widely availability to as many customers as possible

• e.g. soft drinks and snacks

Name the second type of the distribution scope strategies

Selective distribution

• choosing the most appropriate distributors to sell product through to maintain some level of control over how product is sold

Name the third type of the distribution scope strategies

Exclusive distribution

• reinforces the perceptions of prestige and/or exclusivity for a product

• selling through its own stores or a very exclusive group of distributors, eg. hermes

Outline the first of the two distribution philosophies

Postponement:Produce only after order is confirmed

• Pros: Low risk of unsold stock

• Cons: big time lag, high admin/ordering costs

• Best for: customers or personalised products, e.g. car

Outline the second of the two distribution philosophies

Speculation:

Produce in anticipation of demand

• Pros: economies of scale, lower admin and ordering costs

• Cons: higher risk of outdated, storage/warehouse costs

• Best for: high-demand or hype products (limited edition,ect)

Outline the first of the two distribution trade-offs

Control v reach

• Direct channels: company stores, websites, ect give more control over brand experience but reach fewer customers

• Indirect channels: retailers and distributors, reach more customers but with less control over how brand is presented

Outline the second of the two distribution trade-offs

Exclusivity v accessibility

• Exclusive distribution: builds premium brand image

• Extensive distribution: reinforces convenience and reliability