A Vital Part of Effective Marketing Strategies - Assignment Example

As the new products are set to the market for commercialization it would be recommended to utilize a pricing strategy that maximizes the current profits. The company should estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profits, cash flow, or rate of return on investment. In emphasizing current performance the company may sacrifice long-run performance by ignoring the effects of other marketing-mix variables, competitors’ reactions, and legal constraints on price.

However as the product matures in the market and if the company is pursuing to keep the product in the market, it would be recommended to utilize the market-skimming pricing strategy as a sufficient number of customers would have a high current demand and high price communicates the image of a superior product. Besides the high initial price (the cost to market) will tend to discourage the competitors to compete in the same product quality levels. A guide to the pricing strategy can be derived from the following table.

HighMediumLowHigh1.Premium 2.High-value3. Super-valueMedium4. Overcharging5. Medium Value6.Good valueLow7. Rip-off8. False economy9.Economy3. What pricing tactics would you recommend? Justify your recommendations. Pricing tactics will depend on several factors (Kotler, p.472) e.g.Company objectives such as maintaining brand image, maximization of revenue, maximizing profits, market coverage and expanding current market share, expanding to new markets Market segmentation and product positioning to identified target marketsThe marketing mix deployed by the company for the target market/sCompetitor marketing mix strategiesAvailability and demand for substitute productsAccordingly, pricing tactic can be adapted from the following tableTable 2 marketing Mix Alternatives Source: (P.

Kotler, p.496)Strategic Option/pricing tacticReasoning ConsequencesMaintain price and perceived quality. Engage in Selective customer pruningThe firm has higher customer loyalty. It is willing to lose poor customers to competitorsSmaller market share. Lowered profitability.Raise the price and perceived qualityRaise the price to cover rising costs. Improve quality to justify higher pricesSmaller market share maintained profitability.Maintain price and raise the perceived qualityIt is cheaper to maintain price and raise the perceived qualitySmaller market share.

The short-term decline in profits. Long-term increase in profitsCut Price partly and raise the perceived qualityMust give customers some price reduction but stress higher value of the offerMaintain market share. The short-term decline in profits. Long-term maintained profits.Cut-price fully and maintain perceived qualityDiscipline and discourage priceMaintained market share. The short-term decline in profitsCut-price fully and reduce the perceived qualityDiscipline and discourage price competition and maintain a profit marginMaintain market share.

Maintained margin. Reduced long-term profitsMaintain price and reduce the perceived qualityCut marketing exposure to combat rising costsSmaller market share. Maintained margin, reduced long-term profitsIntroduce an economy modelGive the market what it wantsSome cannibalization but higher total volume