Market Segments and Marketing

Price and Channel Strategy Dynamic and Static Pricing Strategies Price constitutes an important element of the marketing mix. It significantly influences profitability and business growth. Price is basically the cost the consumer incurs in acquiring the product or service on offer. It is the only element in the marketing mix that has direct implications on revenue. Major factors that influence pricing decisions include cost, consumer preferences, competition, and distribution channels (Baines, Fill & Page, 2011).

Within the global or multiregional context, price setting may be even more complex as additional factors have to be considered, such as foreign exchange costs, inflation, and export costs (Wilson & Gilligan, 2005). Generally, pricing may be static or dynamic. Static pricing entails maintaining the same price for all customers regardless of changes in market conditions (Lamb, Hair & McDaniel, 2012). While this option minimises administration difficulties, it may not satisfy all market segments (Baines, Fill & Page, 2011). For instance, high-end consumers may equate low prices to low quality or product inferiority.

Static pricing may particularly be ineffective in the global or multiregional context as the organisation serves diverse market segments. Dynamic pricing would be more appropriate. Also, known as flexible pricing, dynamic pricing involves changing prices based on the prevailing market conditions (Lamb, Hair & McDaniel, 2012). Pricing may be influenced by factors such as demand, season, product life cycle, regulations, and consumers' sensitivity to price. Flexible pricing means that high-end and low-income consumers may be charged different prices for the same product.

High-end consumers may prefer premium pricing, while low-income consumers may favour economy pricing. Equally, the firm may offer a lower price during early stages of the product lifecycle so as to increase market share (penetration pricing). Once the brand is built, prices can then be adjusted, with the product being repositioned as superior. Also, customers in different regions may be charged differently depending on the local conditions. On the whole, pricing decisions must be carefully weighed against the relevant factors to effectively capture all the targeted market segments.

Distribution Strategies Distribution also represents an important element of the marketing mix. Distribution strategy denotes the plan for delivering the product to the end consumer. An effective distribution strategy is important for the success of the product in the marketplace (Wilson & Gilligan, 2005). It ensures consumers get the product whenever and wherever wanted. The choice of distribution strategy is often informed by factors such as the location of the target market and its characteristics as well as costs. Generally, distribution may be direct or indirect (Baines, Fill & Page, 2011).

Indirect distribution encompasses sending the product to the consumer with the help of intermediaries such as distributors, wholesales, and retailers. Though this option often lengthens the supply chain, it may be more appropriate when intermediaries have greater distribution advantages compared to the firm. Direct distribution, on the other hand, entails distributing products without intermediaries. The product is sent directly to the end consumer via firm-owned brick-and-mortar stores or online retailing platform. This may reduce distribution costs to the advantage of the final consumer.

The choice of distribution channel may further be informed by the degree of penetration the firms want to attain. This gives rise to three options: mass distribution, selective distribution, and exclusive distribution (Lamb, Hair & McDaniel, 2012).