Marketing Strategies, Pricing Strategies, and Distribution Systems

Marketing Strategies During Product Life Cycle

Maturity Stage of Product Life Cycle

  • Sales tend to slow and competition increases.
  • Profits may stabilize or decline, necessitating innovation.
  • Companies need to modify products and marketing strategies based on changing consumer needs.
  • Focus:
    • Maintain market share.
    • Extend product lifespan.

Marketing Strategies

  • Defending Market Share:

    • Use promotional pricing.
    • Differentiate the product from competitors.

  • Product Differentiation:

    • Highlight unique features to stand out in the market.

  • Reinforcement Advertising:

    • Keep consumer loyalty and remind them to continue buying.

  • Discounting:

    • Introduce discounts or value deals to maintain competitiveness.
Effective Strategies
  • Market Penetration Pricing:
    • Competitive pricing to retain customers.
  • Value-Added Pricing:
    • Offer extra features or services to improve appeal.
  • Product Line Pricing:
    • Different versions of products at varied price points.
  • Promotions & Loyalty Programs:
    • Encourage repeat purchases.
  • Selective Distribution:
    • Maximize brand presence at key locations.
Strategies to Avoid
  • Market Skimming:
    • High pricing can drive cost-sensitive customers to competitors as the product is no longer new.
  • Frequent Discounts:
    • May adversely affect brand perception.
Goal
  • Stay competitive, retain customers, and maximize profits.

Sources for Generating Product Ideas

  • Internal Sources:

    • Employees, R&D teams, sales teams.
    • Innovations based on internal feedback.

  • External Sources:

    • Insights from competitors, customers, suppliers, and market trends.
    • Utilize market research and trend analysis for new product ideas.

Pricing Strategies

Types of Pricing Strategies

  1. Product Mix Pricing:

    • Company prices products in a way to maximize overall profits.
    • Example: Gillette sells razors cheaply but profits from expensive cartridges.

  2. Product Line Pricing:

    • Different prices for products in the same category based on features.
    • Example: Apple’s iPads from budget-friendly to high-end.

  3. Price Elasticity:

    • Inelastic Demand: Price changes don’t affect demand much.
    • Elastic Demand: Price changes significantly affect demand.
    • Example: Coffee shop raises iced latte prices, leading to a decrease in sales and total revenue, indicating elastic demand.

  4. Customer Value-Based Pricing:

    • Prices set based on perceived consumer value.

  5. Cost-Based Pricing:

    • Pricing determined by production costs plus a profit markup.

  6. Competition-Based Pricing:

    • Prices set in relation to competitors.
Captive-Product Pricing
  • Main product sold low, but necessary accessories priced high.
  • Example: Cheap printers with costly ink cartridges.
By-Product Pricing
  • Utilizing waste or by-products to generate revenue.
  • Example: Leather manufacturers selling scrap leather.
Product Bundle Pricing
  • Grouping products together at a discounted rate.
  • Example: McDonald's Happy Meal.
Optional-Product Pricing
  • Offer upgrades or accessories at additional prices.
  • Example: Optional car upgrades.
Market Skimming Pricing Strategy
  • High initial pricing to maximize early profits, then gradually lower.
  • Example: Apple iPhones initially priced high.
Market Penetration Pricing Strategy
  • Low initial pricing to capture market share quickly and deter competition.
  • Example: Netflix's initial low subscription pricing.

Legal Considerations in Pricing

Pricing Laws

  • Price-Fixing: Competitors cannot illegally agree on prices.
  • Predatory Pricing: Big companies must not sell below cost to eliminate competition.
  • Price Discrimination: Illegal unless justified by cost differences (Robinson-Patman Act).
Key Laws
  • Sherman Antitrust Act (1890): Prohibits price fixing.
  • Clayton Act (1914): Bans certain discriminatory pricing.
  • Robinson-Patman Act (1936): Outlaws unfair price discrimination.
  • FTC Act (1914): Prevents unfair pricing practices.

Distribution Strategies

Multichannel Distribution System

  • Uses multiple channels to reach various customer groups.
  • Involves direct sales, retailers, and wholesalers.
  • Challenge: Potential conflicts and the need for coordination.

Types of Distribution Strategies

  • Intensive Distribution:

    • Products available in as many outlets as possible.
    • Example: Coca-Cola.

  • Selective Distribution:

    • Products sold in selected outlets based on criteria.
    • Example: Nike shoes.

  • Exclusive Distribution:

    • Limited number of outlets selling the product.
    • Example: High-end brands like Gucci.
Law of Leadership
  • First-mover advantage is superior to being better than competitors.
  • Example: Apple established dominance with the first major smartphone featuring a touch interface.