Marketing Mix - Pricing Strategies

Hello students!

This post is to provide you with more information regarding pricing strategies.  We will review them briefly at the start of next class period, however, due to the engaging discussion today, we will not be able to spend as much class time reviewing this as I had hoped.  As always, feel free to email me or come by the office if you have any questions or would like to discuss the topic!  Enjoy.

DIFFERENT PRICING STRATEGIES

1. Penetration Pricing:  The company sets a low price o increase sales and market share. Once market share has been captured the company may increase the price.  Ex: A television satellite company sets a low price to get subscribers then increases the price as their customer base increases.

2. Skimming Pricing:  The company sets an initial high price and then slowly lowers the price to make the product available to a wider market.  The objective is to skim profits of the market layer by layer.  This is often popular in high-technology industries. Ex: A computer company introduces a new cell phone at a high price (<$500) at launch, then gradually reduces the price over the following 2 years, charging a premium at launch and the lowest price (sometimes free with contract renewal) near the end of its life cycle.  Think Apple and the iPhone.

3. Competition Pricing:  Setting a price in comparison with competitors.  Really a company has three options and these are to price lower than competition, equal to competition or higher than the competition. Ex. Some companies offer a price matching service to match what their competition is offering.  Think about the new Walmart television advertisements.

4. Bundle Pricing: The company bundles a group of products or services at a reduced price. Common methods are buy one and get one free promotions.  This strategy is popular in supermarkets and other retail centers.

5.  Psychological Pricing:  The seller will consider the psychology of price and the positioning of price within the market place.  Ex. The seller will charge $2.99 instead of $3.00 or even $199 instead of $200.  The reason why this method work is because buyers will still say that they purchased their product under $200 even though it was only a dollar away.  This is a rather engaging pricing strategy.  Think about gas stations and their pricing strategies on a gallon of fuel.

Marketing Mix - Product Strategies

When a company introduces a product into the marketplace, they must ask themselves a number of questions.

1) Who is the product aimed at? (This will be your core customers aka Target Market)
2) What benefits will the customers expect? (What does your product or service do?)
3) How does the company plan to position the product in the market? (Will it be a luxury item? Or a value item? Remember from the class discussion of the Toyota family of cars: Lexus, Toyota and Scion)
4) What differential advantage will the product offer over their competitors? (Can be anything, but often relates back to the uniqueness of your product)

What makes a product unique?  This is what companies must decide when designing the product.  The uniqueness is often the source of competitive advantage.  In fact, the more unique an item is, the longer the competitive advantage remains.  This should be every company's goal: to create a product with a non-imitable advantage.

The product design decisions focus upon:
DESIGN- Will design be the selling point for the company as we have seen with the iPad, the VW Beetle or the Dyson Ball vacuum cleaner?
QUALITY- Quality has to be consistent with other elements of the marketing mix.  A premium-based pricing strategy has to be reflected in the quality of the product that is offered.
FEATURES- What features will the company add that may increase the benefits offered to the target market?
BRANDING- The value of brands in today's environment is phenomenal.  Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.  This is often associated with companies that have been around for a long time.  Think about Coke, McDonalds and IBM.

YOUR ASSIGNMENT: Write an argument about which product decision is the most important for a new company.  The paper should be a maximum of 400 words.  Don't be afraid to use your text to help support your argument.  This is due by the start of next class period.

The 4 P's of Marketing - Overview

(It will be wise to remember these four  P's for the exam!)

Good Afternoon class & other visitors!

Today we will begin our discussion of the four P's of marketing.  They are commonly known as the "marketing mix" and are essential to a further understanding of marketing. The marketing mix is a planned mix of the controllable elements of a product or service's marketing plan.  The four elements are: Product, Price, Place and Promotion.  Marketers must use these tools in the right combination that serves the needs of the company's customers.  The trick is to do this while generating income (the goal of any company).  We will get to know each one better in the coming class periods and posts!  

For now, watch the video below prior to the next class period.  There will be a short (2 question) quiz at the start of class on Thursday based upon the video.  It will be an easy 5 points if you watched the video and a bit more difficult if you haven't. ;)

Marketing-Definition

The definition of marketing is rather short.  Remember the class slide with the definition:

MARKETING (noun) The action or business of promoting and selling products or services.

If that is the totality of marketing, why am I teaching a 16 week class on the subject and why are you enrolled?  This could be covered in a few hours if it were only so simple.

In the comments section for this post, please discuss what marketing means to you, both as a consumer and as a future professional in the field.  Everyone is to post at least once, but feel free to build upon what others have said and to revisit the blog and create a discussion on the topic.  Those who participate before our next class will receive the 15 points for this assignment.

What is Marketing?

Interest in marketing has grown over the past decade.  Casual observers are drawn to the glamour and sex appeal from shows such as AMC's Mad Men.  

Mad Men is not a reference to the characters style or even state of mind.  It is from a far less glamorous reference to the location of the firm, Madison Avenue.  In fact, marketing in today's environment is far less instinctual and involves a great deal of planning and knowledge about customers and their needs.  marketing has evolved into a field where analytics and creativity go hand in hand to create messages that resonate with customers.

And if marketers are successful, they are able to influence behavior.