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Pricing Strategy and Distribution
Pricing and Distribution Strategy Analysis
The most critical series of decisions any company makes are which distribution channels and pricing strategies to rely on for each product or service they offer. Pricing is the most strategic factor in any marketing, supply chain and production series of decisions because they not only send a very clear message of market value, they also have an immediate impact on profitability (Dudick, 1989). The intent of this analysis is to determine and discuss the best possible pricing strategy for a new tablet PC that would compete directly with the Apple iPad. Second, the pricing tactics, legal and ethical issues, use of differential pricing is also discussed. Next a marketing distribution channel analysis is defined along with a description of how it fits the overall marketing objectives align with launching a new tablet PC.
Pricing Analysis for a Proposed Tablet PC
As pricing is the most potent marketing variable at defining differentiation while also protecting gross margins, it is the one variable that needs to be treated as an asset that shouldn't be squandered carelessly (Dudick, 1989). In the case of innovative new products as a new Tablet...
There are several excellent reasons for pursuing this strategy. First, the market is relatively new and there is ample room for margin retention due to lack of price competition. Second, the innovativeness of the Tablet PC will command higher pricing and margins over time due to its unique value proposition and differentiated user experience (Dong-Qing, Liu, 2005). As the majority of financially successful products earn back their initial investments within the first third of their product life, a skimming pricing strategy would be the best possible strategy for accomplishing this (Dong-Qing, Liu, 2005). Pricing tactics for a Tablet PC need to concentrate on creating differentiation through value, not just use price alone as a means to differentiate. In high-growth, price-inelastic markets it is common for high tech companies to raise the prices of their best-selling products and attain greater contribution margin (Dong-Qing, Liu, 2005). By choosing a skimming-based strategy that preservers gross margin while also differentiating the Tablet PC, profitability and growth can be preserved and the product will be successful. Pricing wars and conflicts must be avoided at all costs with a new, very expensive product such…
References
Dong-Qing, Y., & Liu, J.J. (2005). Competitive pricing of mixed retail and e-tail distribution channels. Omega, 33(3), 235-247.
Dudick, T.S. (1989). Pricing strategies for manufacturers. Strategic Finance, 71(5), 30-30.
Frazier, G.L. (1999). Organizing and managing channels of distribution. Academy of Marketing Science.Journal, 27(2), 226-240.
Gattorna, J. (1978). Channels of distribution conceptualisations: A state-of-the-art review. European Journal of Marketing, 12(7), 471-471.
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