Smart Phone Pricing and Distribution Channel Analysis Essay

Download this Essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Essay:

Smart Phone Pricing and Distribution Channel Analysis

The pricing strategies and tactics of innovative products including smart phones more effectively and clearly define their position in a market compared to another other strategy including marketing and advertising (Piercy, Cravens, Lane, 2010). The decision to pursue a specific pricing strategy will have a long-term impact on how the value of the smartphone is perceived by customers, and will also impact how elastic a potential new market is. Due to all of these factors over and above covering costs and ensuring a sufficient gross margin for profitability, pricing is the most strategic of marketing strategies there are (Marn, Roegner, Zawada, 2003). The intent of this analysis is to present a pricing strategy for a new smart phone, determine and discuss pricing tactics for the phone, and identify any legal and ethical issues related to the chosen pricing tactics. In addition, marketing distribution channel analysis and how the distribution strategy fits with the product, services and overall marketing objectives of the company are assessed.

Defining a SmartPhone Pricing Strategy

In creating a pricing strategy, the objectives of defining value-based differentiation in the smartphone market needs to be addressed, in addition to evaluating the pricing strategy based on competitive forces in the market. Choosing a value-based, skimming strategy is recommended based on the analysis completed in this section. Value-based pricing with a price premium is the most effective strategy as it will first position the smartphone in an area of the market where commodity-producing market dynamics aren't as prevalent (Piercy, Cravens, Lane, 2010). Pricing above the area of the market where price wars dominate vendor marketing strategies not only saves gross margins and profitability, it saves brand value too. Choosing a value-based pricing strategy that skims the top of the market will ensure the new smartphone isn't shopped on price and availability alone, further distancing the new product from commodity-driven selling.

Value-based pricing that supports a skimming strategy will also attract an entirely different segment of customers than competitors who complete on price alone (Allsopp, 2005). This is evident from how successful Apple is with the iPad and iPad2 series of tablets, where their value-based pricing continues to be very successful in attracting a new customer segment to the company (Piercy, Cravens, Lane, 2010). A skimming strategy keeps devices solidly positioned at the higher end of the market, where elasticity is greater and there is less of a focus on feature-to-feature competition and more on value (Marn, Roegner, Zawada, 2003).Even in inelastic areas of the smartphone market, pricing above the median level will further communicate value and create differentiated positioning. Apple's iPhone and iPad pricing are managed according to these guidelines, as is clear from their position and strength in their chosen market segments and profitability attained.

Defining Pricing Tactics for a Smart Phone

In defining the series of tactics for pricing a new smart phone, competitive and market forces need to first be taken into account, followed by the aligning of the tactics to the broader strategic plans and goals of the company. In order to fully capture the competitive and market forces influencing smartphone pricing globally, Porter's Five Forces Analysis has been used to analyze this market. Figure 1 provides an overview of these five forces as captured in the Porter Five Forces Analysis framework.

Figure 1: Porter Five Forces Analysis Framework of the Smartphone Industry

Sources: (Porter, 2008) (Poe, 2005) (Romero, 2011)

This analysis indicates that the current smartphone industry is one that is experiencing rapid economies of scale in manufacturing, supply chain, sourcing and distribution channel dynamics. It also indicates that buyers (or customers) and their purchasing habits are a strong catalyst of continual change and growth in the product lifecycles of smartphones today. A smartphone marketer or manufacturer seeing this would quickly resort to a penetration marketing strategy to quickly gain market share, hoping to "lock in" customers with service agreement and long-term service contracts. That strategy would be very risky and unprofitable over the long-term as the smartphone itself would quickly turn into a commodity. A better strategy would be to interpret the Five Forces Model and seek to create a series of pricing tactics that further position and strengthen the smartphone as a platform, not just a device. Pricing tactics that stress high-end value and benefits and the pervasive use of bundling can lead to greater customer loyalty over the long-term (Romero, 2011). Choosing bundling, special promotions that underscore the platform-like aspects of the…[continue]

Cite This Essay:

"Smart Phone Pricing And Distribution Channel Analysis" (2011, November 11) Retrieved December 7, 2016, from

"Smart Phone Pricing And Distribution Channel Analysis" 11 November 2011. Web.7 December. 2016. <>

"Smart Phone Pricing And Distribution Channel Analysis", 11 November 2011, Accessed.7 December. 2016,

Other Documents Pertaining To This Topic

  • Industry Analysis of the Computer

    This continues the cycle of relying on production efficiencies and build-to-order strategies as an attempt to break the cycle of disruptive innovations (Ervolina, Ettl, Lee, Peters, 2009). All of these factors lead to a task-based analysis of the computer peripherals market that continue to illustrate how fragmented and highly cost-driven it has become. Figure 1 shows the market share of the computer peripherals industry from a product standpoint. Computer monitors

  • Xiameter Case Analysis Advantages of Needs Based vs

    Xiameter Case Analysis Advantages of Needs-Based vs. End User-Based Segmentation Strategies Suggestions for Xiameter Product and Pricing Strategies Advice and Recommendations Xiameter's success as a subsidiary of Dow Corning is predicated on the successful differentiation of an entirely new business unit based on the concept of reducing operating expenses and passing on the savings to the customer. The Web-only, highly automated approach to order fulfillment, complemented by a reduced product lien footprint and terms

  • Media Analysis the Following Pages

    However, it seems that customers are not interested in the motives of these companies, they just want their problems addressed. It is important that media companies focus on such activities. The fact that the activity of Fairfax Media allows the company to reach a large number of users, this can be considered an advantage in promoting its corporate social responsibility activities. This strategy can help the company increase its number

  • Yahoo Company Analysis Yahoo Is a Leading

    Yahoo Company Analysis Yahoo is a leading global internet and digital media services company, among the first internet search businesses. The company was created by Jerry Yang and David Filo in 1994. It continues to grow and differentiate its portfolio of services. The search engine comes with electronic mail services, news portals, social media products, and finance engine and web directory. The social media segment entails content sharing, expert networks, and

  • Marketing Management and Analysis Marketing

    Business users will be charged $45 a month for data. By giving back the revenue to the carriers, which they may use for subsidies, Apple is hoping to dramatically increase its volume, as well as sell more Macintosh computers to iPhone users" (Markoff 2008). This tradeoff illustrates an important aspect of marketing any new technology -- not only must the product be affordable, but so must the service itself. Apple

  • iPad & Macbook Air Marketing Analysis in

    IPad & Macbook Air Marketing Analysis In an economy that is still considered dismal by many, the marketing strategies of successful companies are viewed as guideposts by competitors who wish to both break into the market and maintain a significant presence. In viewing the branding tactics used by Apple for products such as the iPAD and MacBook Air, one can see the tactics used to not only brand these products in

  • Marketing Plan the Potential Audiences

    There is also the potential to expand the product line beyond the initial Tablet PC to support more advanced and customized configurations through the build-to-order strategy. There is also a very significant upside potential with accessories as well, which could become very high margin in the future. Finally there are significant threats from Apple and others who also are seeking to create a dominant market position for themselves in

Read Full Essay
Copyright 2016 . All Rights Reserved