Partial cost recovery. This is an objective that might have interest for an organization that has other revenue sources.
Maximize quantity. The objective seeks to maximize the quantity of products/services sold or the number of customers in order to reduce costs in the long-term as predicted by the learning curve, also known as the experience curve.
Quality leadership. Use price as a tool to designate high quality and position the product as a quality leader.
Survival. Whenever the market situation is in decline or at overcapacity, a company may choose a pricing level that covers the costs and allows it to remain in the market even though the profits may be affected. This is usually a short-term strategy.
Status quo. A company may choose price stabilization, thus avoiding price wars and maintaining a moderate profit level.
'Nutri Mix' will be positioned as a medium priced product, just like other healthy breakfast cereal products on the market, such as Weet-Bix from Sanitarium Health Food Company. The product won't have a line of cereals for specific medical problems (e.g. gluten free), so there won't be any highly priced product in the initial phase.
Some of the most common price strategies refer to predatory, penetration and skimming pricing. The first refers to selling the products at a very low price meant to drive competitors out of the market or create barriers to enter the market, while the second refers to setting lower prices for the products in order to attain a larger, if not dominant market share. Generally, penetration pricing is used when entering a new market or attempting to increase a relatively small market share. The strategy requires high demand elasticity, so that the demanded quantity for the product using the strategy changes easily when its price changes. Skimming prices strategy involves adopting a relatively high price for a product at first and a lowering of the same price over time, thus allowing the company to recover its sunk costs faster (Wikipedia, 2009). Considering that healthy products are prices slightly higher than normal food products in most existing markets, 'Nutri Mix' will also fall in this category and be prices above the normal breakfast cereal in supermarkets, but at the same level with competing products on the health food niche. Therefore, skimming prices is the strategy that will be adopted initially by the company.
This strategy refers to the establishment's location, the logistics, market coverage and infrastructure endowments (e.g. internet). Distribution-related decisions include: distribution channels, warehousing, transportation, inventory management, market coverage, reverse logistics, order processing and distribution centres (NetMba.com (a)).
Some of the most common distribution channels available to companies can be defined as below:
Direct selling. It implies selling the products/services by dealing directly with the customers, rather than use intermediaries. Traditional methods include telephone selling, mail order or door-to-door selling. Recently more methods have been developed including telemarketing, online shopping or radio selling. In the 1990s, direct selling was increasing a lot in Australia as was all over the world. The results of a consumer survey study indicated that consumers had a negative perception towards network marketing, while holding a low positive view of direct selling (Kustin & Jones, 1995). Despite relatively positive results regarding direct selling, this is not seen as an appropriate distribution type for food products, 'Nutri Mix' being included here.
Advertisement. Advertisements are strongly related to advertising. Advertising is a form of marketing communication through which customers are persuaded to purchase and buy more of a brand or products/services. Advertisements are the adds that support the advertising activity and they are created to increase consumption of the a given product/service or reinforce brand image or brand loyalty. For distribution purposes, advertisements are usually used for consumption goods, 'Nutri Mix' falling in this category. However, this will be discussed further in the promotions section of the 4Ps.
Distributor. A distributor is a company that markets or sells merchandise, especially a wholesaler. It is also the company that sells to the retailers.
Retailer. Retailers are companies that sell directly to the consumers and can range from large businesses such as Wal-Mart to small businesses such as non-chain locations managed independently, like a family bookstore.
Agent. Agents usually sell on behalf of the producer and work on commission.
Given that Healthy Co. Pty Ltd. is just entering the market with a brand new product, the company won't have the capacity to handle a distribution channel with a few links (e.g. distributor for a large retailer)....
Therefore, the distribution will be done via at least one distributor and one retailer. The products will get to the consumer through a large retailer, although later on the company will consider distributing its healthy products through small healthy food shops.
This strategy refers to the advertisement, the promotions used to attract customers, the direct sales, the overall sales activity, the public relations and media. Promotion-related decisions refer to: promotional strategy (e.g. push or pull), advertising, sales promotions, sales force & personal selling, PR & publicity and marketing communications budget (NetMba.com (a)).
According to About.com (2009), integrated marketing communication (IMC) is a "management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, and direct marketing work together as a unified force, rather than permitting each to work in isolation." The integration of all promotional tools is meant to maximize impact on consumer mind and minimize costs. IMC is important because it allows companies to design campaigns that are both effective and consistent across multiple media platforms and/or types. It can be distinguished between audio/visual media and published media. Audio/visual media includes television (terrestrial and digital), radio, cinema, billboards, transport, direct mailing, while the published media includes newspapers (national, local, regional), magazines (specialist, consumer), internet and trade & professional press. Each media type has its advantages and disadvantages and marketers should be aware of those when designing their marketing campaigns. It can also be distinguished between advertising, sales promotion, public relations, personal selling and direct marketing in terms of integrated marketing communications or better said the marketing communications mix. Advertising is "a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement" (KnowThis.com, 2009). Sales promotion refers to short-term incentives to boost the sales of a given product/service. Public relations (PR) refer to the building of good relations and company image with the company's "public." Personal selling includes presentations made by the company's sales force in order to build relationships and increase sales. Finally, direct marketing handles direct communications with targeted individuals with the purposes of obtaining a direct response and building strong relationships.
Healthy Co. Pty Ltd. will adopt an IMC budget to cover advertising, sales promotions and some PR in the initial phase. The advertisements will be placed in supermarkets and the advertising campaigns will be done in the internet and health-related print media. The sales promotions will cover each product line at the time to give customers a change of trying each product line with a buying incentive before becoming used to them. The PR will focus on the health benefits of consuming 'Nutri Mix' and the environment aspects.
'Nutri Mix' is a breakfast cereal mix of products focused on healthy eating habits for mainly children and senior consumers. Product awareness is an important goal for the company is 'Nutri Mix' is its market entering product in Australia. Targeting a specific market gives the company the ability to compete better on a very mature market (that of breakfast cereals), while setting the market share goals to 5% within the first 6 months, should tell the manufacturer if the products are viable or not for this type of market.
The product will be split in more categories, some more directed to children, others to the entire market, while the promotional activity will be focused on target sub-segments depending on the product content. The pricing strategy will be a skimming one to enable the company to recover partially or totally its sunk costs. The distribution will be done via at least one distributor and one large retailer in the beginning with the possibility to extend to small shops in a future stage. The promotional activity will focus on advertising, sales promotions and some PR in the initial phase.
About.com, retrieved July 15, 2009, from:
Australian Bureau of Statistics. (2004). Australian Social Trends, 2004. Retrieved July 15, 2009, from: http://www.abs.gov.au/Ausstats/a[email protected]/7d12b0f6763c78caca257061001cc588/31bd15113714d0fcca256e9e00295194!OpenDocument
Australian Government Intergenerational Report (IGR). (2004). Australia's Demographic Challenges: Retrieved June 25, 2009, from:
CHOICE. (2009). Breakfast Cereals Compared. Retrieved from:
KnowThis.com, 2009. Retrieved from:
Kustin, R.A. And R.A. Jones, (1995). Research note: a study of direct selling perceptions in Australia. International Marketing Review, Vol. 12(6): pp. 60-67.
NetMba (a), 2009, http://www.netmba.com/marketing/mix/
NetMba (b), 2009, http://www.netmba.com/marketing/pricing/
Parliament of Australia. (2006). Overweight and Obesity in Australia. Retrieved from:
Queensland Government. (2009). Australian Demographic Statistics. Retrieved July 15, 2009, from: http://www.oesr.qld.gov.au/
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