As a marketer you will always be challenged to identify a potential route for charging higher prices, as it is unlikely that profit goals will allow for the sustainable continuance of low prices. Some of the points to consider in doing this are as follows:
o The strength of the customer relationship built by the salesforce – how does this impact
upon the ability of the organization to negotiate higher prices?
o Is the perceived value, that is the value proposition, enough to give the organization
competitive advantage?
o Does the marketing segmentation strategy highlight where some target groups are more
or less price-sensitive than others?
o How might the branding strategy allow for several price positions to be upheld in the market? o Are there any opportunities for skimming the market – price skimming?
Summary
The price element of the marketing mix leaves marketers aiming to achieve the ultimate blend of price, quality and perceived value. A balanced marketing mix will ensure the customer is getting the right product in the right place, at the right time, for the right price.
Customers are very fickle today and clearly understand that they have significant choice, and indeed power, in the marketplace and that they have significant influence upon supply and demand.
Prices will vary according to what people are prepared to pay in different situations. Different prices might also reflect what customers can pay or are prepared to pay. However, from a management perspective, you are challenged to consider whether price is simply what the customer will pay, or a more flexible marketing tool than just that.
In order to understand the influence of price on the customers and competitors, a marketer must under- stand the need for significant ongoing research into the state of the external environment and the activities of competitors and gain a key understanding of buyer behaviour and expectations.
The critical success factors in relation to price are to maintain the organizational objectives, yet endeavour to remain sensitive to the needs of the customers, ensuring that you can address their long- term needs, including the further development of new and innovative additions to the product range and lines. The key to price is to link the product quality with clear indication of value for money from the organization to the customer.
Pitching the price at the right level may be the difference between profit and loss or survival and failure, as pricing will reflect the long-term profitability and market share. Therefore, in order to achieve a marketing- oriented approach to pricing, the organization should take into account a broad range of factors:
o Marketing strategy o Value proposition
o Price–quality relationships o Competitive pricing o Costs
o Ability to negotiate higher prices o External market forces
o The effects of globalization o Product line pricing.
Study tip
The basis of pricing in the context of Marketing Planning relates to understanding the concepts of pricing, the implications of pricing and possible approaches to implementation of pricing strategies in line with the corporate goals and marketing objective. The technicalities of pricing are covered in Management Information for Marketing Decisions, which is where you will learn the actual basis of calculation. Therefore from an exam perspective it is likely that you will discuss potential pricing strategies, discuss influences on price and some of the strategic determinants.
In the exam, pricing is invariably included as an integral part of the marketing mix, with some individual pricing questions appearing on some, but not all, papers.
Question spotting and question prediction is a dangerous game, therefore always be well prepared, ensuring that you have a full knowledge and understanding of the subject in pre- paration for providing good robust answers.
Extending knowledge
Recommended readingRecommended reading for this unit again comes from Dibb, Simkin, Pride and Ferrell (2001), Chapters 18 and 19. This will provide you with a very broad perspective of pricing. You will find these chapters very useful again when you study for Marketing Research and Information, as they explain some of the basis of the calculations required.
Bibliography
Dibb, S., Simkin, L., Pride, W. and Ferrell, O. (2001) Marketing: Concepts and Strategies, 5th European edition, Houghton Mifflin.
Piercy, N. (2001) Market Led Strategic Change, Butterworth-Heinemann.
Sample exam questions and answers for the Marketing Planning module as a whole can be found in Appendix 4.
unit 7
place operations
Learning objectives
Place operations highlights the importance of distribution as a key factor in achieving the ultimate marketing mix. It is the final component and relates to ensuring that customers are able to gain access to and purchase their chosen product.
This unit reflects the same principal learning outcomes as the other marketing mix units, in terms of understanding the need to integrate the marketing mix tools and achieve effective implementation of plans.
From a place perspective, the indicative content reflects the following:
o Determine the channels of distribution and logistics to be used by an organization and develop a
plan for channel support. Syllabus reference: 3.9
Introduction
It is a known fact that without distribution ‘place’ the best product or service will not be delivered and the marketing mix will break down and fail. It was once said that the ‘place’ was one of the most powerful elements of the marketing mix, as it is the one way that we can both reach and actually service the customer.
Distribution is seen as a component part of the product. Therefore, in order to achieve total satisfaction, customer service will play an essential part in the overall achievement of customer satisfaction, retention and a sustainable competitive advantage.
Distribution works on two key principles:
1. It organizes the exchange process through distribution 2. It organizes communication.
Place plays a pivotal role within the marketing mix, and the key to success will be its successful integration within it, ensuring that customers get their products at the right place and at the right time. This will involve a range of alternative marketing activities based around promotion, price and the actual product design and packaging.
Distribution plays an important role, primarily because it ultimately affects the sales turnover and profit margins of the organization. If the product cannot reach its chosen destination at the appropriate time, then it can erode competitive advantage and customer retention.
An additional factor now facing distribution is the power of the buyers. As buyers we are becoming increasingly impatient, not wishing to wait for our products for any period of time. Therefore, if distribution is a significant player in the decision-making process the conse- quences of an inadequate distribution strategy may be catastrophic. There is an expectation in relation to delivery, in the same way there is with product and price. The combined package provides an expectation in the mind of customers and it also influences their overall perception of the value proposition.
Distribution provides many extensive new business opportunities and is currently at the centre of a range of strategic alliances, mergers, acquisitions, joint ventures and licensing agree- ments. In addition to this, the emergence and explosion of the Internet and other information communication technologies has put distribution on track to be one of the most lucrative business propositions of recent years.
Distribution requires a high degree of management skill, synchronization and integration with the overall organization, as it will be one of the major components in achieving a sustainable competitive advantage. Controlling the flow of products from the manufacturer or producer is no easy task, and as pointed out above, failure to control the flow effectively could decide the level of success you might enjoy in the marketplace.