Lecture notes
Pricing and Distribution Marketing Strategies
- Module
- Business And Management
- Institution
- The University Of Kent (UKC)
Detailed notes on Pricing and Distribution Marketing Strategies
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Pricing and Distribution MarketingStrategies
SOSTAC Reference
Price
What is Price?
Price is the only marketing mix variable or part of the offering that generates revenue. Buyers relate
the price to value. They must feel they are getting value for the price paid.
(Source: ‘Marketing Principle’ v2 chapter 15)
Price premium is considered to be the most useful measure of brand equity (Aaker, 1996)
Note:
• Price premium is the marketing practice of selling an elite product at a cost level above that
of its competition in order to make it appeal to more exclusive and wealthy consumers. A
business producing a high end good or service might add a price premium to its advertised
cost in order to attract more affluent customers that can afford to pay more for what they
think will be a higher quality item.
• Brand equity is a marketing term that describes a brand’s value. That value is determined by
consumer perception of and experiences with the brand.
Key Elements to Pricing
There are several elements in pricing strategy to consider (Schindehutte and Morris, 2001) whatever
market conditions prevail (i.e. exist / reign): value, variable, variety, visible / invisible, and virtual.
• Value: price is fundamentally about value. Customers place prices within the context of
perceived value. For example, when people pay more for sitting in the front row of a
theatre, they still see the same play as everyone else, but get the benefits of being closer to
the actors.
, • 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. While it might not prove to be successful, the decision to raise or
lower a price can be made quite straightforwardly.
Note: Bundling is a marketing strategy that joins products or services together in order to sell them
as a single combined unit. Bundling allows the convenient purchase of several products and/or
services from one company.
(Source: Douglas West, John Ford, Essam Ibrahim ‘Strategic Marketing: Creating Competitive
Advantage’)
Strategic Mindset
Pricing can be a mind-set for many companies and the consequences of the wrong mindset can be
dire.
(Source: Douglas West, John Ford, Essam Ibrahim ‘Strategic Marketing: Creating Competitive
Advantage’)
Strategic Options
A successful pricing means that the prices set have to complement the company’s overall marketing
strategy and ideally strike a balance between maximising revenues and offering customers value
(Rusetski et al, 2011).
Dolan (1995) suggests eight stages to pricing strategy.
(Source: Douglas West, John Ford, Essam Ibrahim ‘Strategic Marketing: Creating Competitive
Advantage’)
Dolan’s Eight Options
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