Pricing Strategy
Essay Preview: Pricing Strategy
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Price: Are we priced competitively? Is our pricing strategy a good fit with the goods or services we are selling (Ex. High quality / higher price; Ave. quality / competitive price; Acceptable quality / EDLP pricing)? How do our prices / quality position themselves in the minds of customers with respect to brand name / equity?
Product: Is our product differentiated from all other competitors or substitutes? What or where is it in the product life-cycle and how that relates to our portfolio of products, brands? Is our product base too narrow or have we overused its equity to a point that the product has lost its differentiation? Whats in the product pipeline for the future from R & D or acquisitions?
Placement: Where and how are we selling our goods / services? Is there a strong pre-existing channel of distribution or is there room for a new innovative distribution process? Should we integrate forward and or backward to assure maximum control of product quality and delivery time? What barriers of entry into the distribution system are there?
Promotion: Which will be more effective, push or pull marketing? Have we done our marketing research homework to determine demographics and psychographic segmentations in order to determine if reasonable profits can be made? Do we do our own advertising or should we outsource this to an ad agency? What POP or POS materials will be needed? Will introductory offers be needed for consumers to try the product and how long must we run them before we can charge full price for our goods / services? Will seasonal (temporal) pricing be needed?
Analyze and Record Problems
Problems and their core elements should be explicitly stated and listed in order of importance.
Here is where we separate facts from opinions (executive judgments). Often the two are confused as one in the same. It is important to state what the primary problem/s are and what are the ramifications in the short and long run?
Formulate, Evaluate and Record Alternatives
Now is when we put the old thinking caps on and let our creative talents run free. Brainstorming sessions, use of the Delphi technique (sending out questionnaires for opinions and ideas, having execs. return them and sending out questionnaires again until a strong consensus opinion is reached) if time and money permit, formation of cross-functional teams to supply information from all departments in order to arrive at achievable alternatives, strategies, plans and goals. What alternative/s maximize solutions of the problem/s and create the fewest new problems?
How much does each alternative cost and what are the benefits (revenues in terms of net present value and payback)? Here is where basic financial analysis from accounting records needs to be reviewed and sales growth / decline trends need to be identified and the use of financial ratios employed to determine the company to industry standing and financial health and capital resources available.
If possible or necessary list 3 three alternatives!
Select and Record Alternative and Implementation Details
Explain which and why the alternative/s were chosen.
What must be done to implement the alternative/s and what personnel will be involved or what restructuring of the company is needed to become or regain profitability?
When and where will the alternative be implemented?
What will be the probability of success or failure?
How will we measure success?
Pitfalls