Price in Marketing Strategy
A pricing strategy can be either long-term or a short-term plan. Prior to developing a strategy for either the long term or short-term plan, the entrepreneur should consider many factors. Keating (2010) explains that the value of one’s product should be compared with that of the competitor. One should also determine whether the market has the ability and the willingness to purchase such a product. The product should have the ability to increase the company’s profits and enable the firm to meet its returns and market distribution objectives (Davidson & Simonetto, 2012). Even before developing a pricing strategy, it is prudent to identify the position of the company, develop a brand strategy and define the channels hoof distribution so that the pricing reveals the value of the product and support the brand (Iftinca & Altier, 2016). Pricing should be taken seriously, as it has an influence on the thoughts of the customers about the product.
First-class pricing, market incursion pricing, cost-cutting pricing, price floating, psychosomatic pricing and fortune pricing are the main pricing strategies known (Iftinca & Altier, 2016). First class pricing involves setting prices far much higher than the costs the competitors are charging for the same product. The strategy is advantageous to small-scale businesses that produce unique goods and is always effective in the early stages of a product life in the market (Keating, 2010). Market incursion pricing offers low prices for products with an aim of attracting more customers. However, Iftinca and Altier (2016) claim that the strategy can lead to losses in the early stages. Cost-cutting pricing is meant for customers who are cost cognizant. The strategy forces the production industries to reduce their costs of production and marketing with an aim of keeping the prices of the products down (Iftinca & Altier, 2016). Price floating strategy lets companies increase the sales volume of new products in the market by charging high costs during the early stages of the product life and gradually reducing the costs as competitors become many in the market. Psychosomatic pricing is a way sellers attract buyers emotionally rather than logically for example by setting a price at $99 instead of $100 (Svendsen, 1999). Finally, fortune pricing involves selling a package of products at a cheaper price that if they would sell each product individually. It is in some way offering free gifts to buyers for purchasing one’s products.
The pricing strategy that should be employed in photo mix max is price-floating strategy with an adoption of psychosomatic pricing. The rationale behind this price floating strategy is that it will allow the company to increase the profit levels as it adapts to the market before it reduces the prices to attract the cost-cognizant buyers. According to Iftinca and Altier (2016), the strategy helps the company recover the costs it used in its development and create a first-time impression of its exclusive quality when the product is first released out to the consumers. Alongside price floating, the psychosomatic strategy aims at creating an impression of affordable prices even if the difference between $100 and $99 is actually minimal (Krstic & Becic, 2011). This is justified by the habit of customers concentrating on the first digit in a price rather than the last digit.
Testing for Price Suitability
The price strategy is tried against various trading circumstances within the market. The pricing strategy may not be applicable in some divisions of the company. In most circumstances, high prices may lead to wastage of money or lose on major company dealings. In determining the best price, a list of all the trading circumstances is tested and analyzed to know the effects on income that can be caused by different prices (Iftinca & Altier, 2016). To test the fitness of the price, the price selected is compared with that of competitors. The pricing strategy has to be changed for a new strategy if the differences between the competitors and individual prices cannot be justified (Krstic & Becic, 2011). The projections the company makes about nature of products and services in the future should be accomplished so that the customers will build and develop trust on the company products.
In order to make profits, the company should be able to cater for the cost of its expenses. Careful evaluation of spending costs is a necessary step to take before determining a price (Iftinca & Altier, 2016). The costs should be categorized into variable and fixed overheads. Fixed costs include spending needs that are always there regardless of the capacity of the profits and sale sizes. Variable costs are the spending requirements that are directly proportional to the increase in sales (Iftinca & Altier, 2016). An example of fixed cost is rent and market rates whereas an example of variable costs is an increase in labor and raw material requirements. The price set ought to be higher than the variable costs of production of the goods and services.
The product photo mix max in NYC suits the market as before the product had been developed, marketing strategy had been created. Selection of the target market and the placing of the product had also been done before (Keating, 2010) .Apart from the value of the product, price is another key variable used in putting the product in place in the market. The product promotion and distribution decisions of other products produced by competitor’s influences the price (Iftinca & Altier, 2016). The demand curve of the product indicates how the sales of the product have been positively influenced by the pricing selected. However, the company should not stop carrying out various tests of the price above and below the existing price. This is because of the elasticity of price in demand. If inelastic demand is realized then price should be increased.
Distribution Channels Effects on the Pricing
Multiple channels of distribution of the photo mix max should be adopted. It is not possible to sell directly the products from the manufacturer to the consumers. Therefore, it is efficient to have several distribution channels. Intermediaries are of great importance in both the business entity and the customers (Keating, 2010). The players facilitate the enhanced competence, better grouping of products, creating a routine in transactions and connecting of goods to various customers. The company will lose its greater power above the manufactured goods and spend extra on every channel of distribution if the number of middle-men in the channel of distribution rise (Davidson & Simonetto, 2012). More intermediaries, however, cause a wider market. Successful running of the distribution channels includes the creation of better relationships among intermediaries. Iftinca and Altier (2016) argues that encouraging the independence of each member of the distribution channel will lead to efficiency of the pricing strategy selected. Structuring the distribution channels independently improves on how the members of the distribution channel relate to each other.
Davidson, A. & Simonetto, M. (2012). Pricing strategy and execution: an overlooked way to increase revenues and profits. Strategy & Leadership, 33(6), 25-33. http://dx.doi.org/10.1108/10878570510631639
Iftinca, M. & Altier, C. (2016). Stacking up Cav3.2 channels. Channels, 1-2. http://dx.doi.org/10.1080/19336950.2016.1242289
Keating, B. (2010). Distribution Channels: Understanding and Managing Channels to Market20101Julian Dent. Distribution Channels: Understanding and Managing Channels to Market. London: Kogan Page 2008. 338 pp., ISBN: 13: 978‐0‐74945‐256‐8 £35.00 Edited by Geoffrey P. Lantos. Journal of Product & Brand Management, 19(4), 312-313. http://dx.doi.org/10.1108/10610421011059630
Krstic, I. & Becic, S. (2011). Implementation of marketing strategy: Factor of competitive advantage. Svendsen, A. (1999). The stakeholder strategy (1st Ed.). San Francisco, CA: Berrett-Koehler Publishers. Marketing, 42(2), 118-126. http://dx.doi.org/10.5937/markt1102118k