Pricing and Distribution

Structure
A. INTRODUCTION

1. Overview and Strategy Blueprint

2. Marketing Strategy: Analysis &
perspectives

C. WHERE DO WE WANT TO BE?

B. WHERE ARE WE NOW?
3. Environmental & Internal Analysis:
Market Information & Intelligence

4. Strategic Marketing Decisions,

Choices & Mistakes
5. Segmentation, Targeting
& Positioning Strategies
6. Branding Strategies
7. Relational & Sustainability
Strategies

D. HOW WILL WE GET THERE?

E. DID WE GET THERE?
14. Strategy Implementation, Control
& Metrics

8. Product Innovation & Development

Strategies
9. Service Marketing Strategies
10. Pricing & Distribution
11. Marketing Communications
12. E-Marketing Strategies
13. Social and Ethical Strategies

Learning
Objectives

Examine the separate and complementary roles

of pricing and distribution to marketing strategy.

Assess pricing mindsets and strategic options.

Evaluate the buyers perspective of distribution

and its implications for strategy.

Introduction
Pricing

and distribution are distinct yet

complementary elements in marketing
Strategically they are difficult to separate.
The price of anything and the route by which it is
distributed simply reflects its value.
Porters two generic differentiation strategies:
Low cost leader
Differentiation

Key Elements to Pricing

Value: Price is fundamentally about value. Customers place prices within the
context of perceived value
Variable: Prices can be changed in a number of ways apart from the absolute level,
such as by time form or terms of payment
Variety: Prices can be set at different levels across multiple products and services
to achieve different objectives for positioning and contribution as with bundling or
unbundling items
Visible/Invisible: Prices may be open and visible or hidden and confusing for
customers
Virtual: of all the decisions marketers make, a price change is arguably the easiest
and quickest decision to make. It might not prove to be successful but the
decision to raise or lower a price can be made quite straightforwardly in most
organisations
(Goldenberg, Horowitz, Levav and Mazursky, 2003)

Strategic Options

Variations
in Value
Price
Sensitivity
Customer
Costs

Reverse
Cost-Plus

POS

Successful
Pricing

Competitor
Reaction
Emotion

Individual?
Bundled?

Target Pricing

Target pricing is a more novel approach to new

product pricing.
The idea is to develop products and services from
the design stage and onwards with a final target
price objective for a particular market.
The main benefit is that target pricing is a
disciplined approach to pricing that brings the
reality of the market place throughout the entire
process, from idea conception to
commercialization

Implementing Pricing Strategy

Human Capital cost of

training and hiring people for pricing

Systems Capital
Hardware and software required for pricing

Social Capital
External participants who influence pricing

Companies need to invest

in all three
capitals for pricing
strategy to work

Primary Concern of Buyers on

Distribution
Access

Search

Possession having

Transaction

C
O
N
V
E
N
I
E
N
C
E

Distribution Options

Direct
Internet
Telephone
Mail
Catalogue
Own channel

Salesforce
Own
Another firms
Contract

Intermediary
Franchise
Wholesaler
Agent/Merchant
Distributor
Partner

Principal channels

Price & Distribution

Appropriate strategies for price and distribution should be

synchronised

Clearly it would be a mismatch to distribute high priced luxury

handbags in discount stores and would only confuse potential
buyers

The inherent brand position and direction must be taken into

account

Market position is another factor. A follower brand with a

relatively small market share is likely to follow the price and
distribution patterns of leaders and generally be sold at a lower
price and be placed in slightly less favourable positions by
distributors

The product life cycle (PLC) is also a consideration. The PLC is a

tool in widespread managerial use (despite its problems) given it
ability to provide some strategic insights

Price & Distribution Strategies

Market Leader
Distribution in place
Price main weapon
Premium price
Variety of options

Market Challenger
Focus on flanks
Direct or indirect attack

Market Niche
Market Follower
Cloning
Set lower prices

Stay with markets

Add niches
Premium price
Selective distribution

Conclusion

Value holds the key to both pricing and distribution

Buyers are savvy and smart, most markets are mature with
products and services near (or at) parity and distribution
channels are varied and largely accessible physically
and/or virtually

Any strategies attempting to rip off or over charge will fail

and longer-term trust will evaporate, particularly with the
information rich web

As a consequence of these challenges, price and

distribution are likely to remain key issues in marketing
strategy in the immediate future