Creating the Marketing Mix Memo
Creating the Marketing Mix Memo
Pricing of a product is crucial in dictating whether it will be successful or not. Where a product’s price is too low, the company loses revenue as it will not be in a position to generate adequate profit to sustain its operations. Where the price is too high compared to what the competitors are offering in the market, the company will lose sales from customers as they will prefer to buy from the competitors (Perreault & McCarthy, 2005). Choosing the right price for the marketing mix is, therefore, critical for the success of the company and especially one that has been out of the competitive market like MM Company. The first approach that can be employed is the penetration pricing strategy. This involves setting the price at a lower level compared to the competitors as the company penetrates the market and then finally raising it to a higher level once a substantive market share has been gained (Monroe, 2003). Having been out of the market for quite a while, MM Company needs to gain a substantial market share in order to make profits. It should, therefore, introduce the new product at a discount in order to give people an opportunity to try it out. However, the price should not be too low so as to avoid suspicion from prospective customers on the quality of the product. The company then closely monitors the success rate of the product in the market in order to determine whether it has got a substantial market share. Another pricing strategy that can be used is market oriented pricing where the company uses information got from its research to determine its price. This is usually in relation to the competitors. MM Company in this pricing strategy would set its prices within the same range as the competitors. I would recommend the use of the penetration pricing strategy in the beginning in order to attract more customers and then switching to the market oriented one once they have made a substantial market share.
The distribution plan employed when the penetration pricing strategy is used involves the use of sales representatives during the advertising and promotion of the product. This is done during the initial period during and after the launch of the product into the market. The sales representatives will offer the product at discounted prices to the initial buyers. Its major aim is to create awareness by enabling customers to try out the mobile phone at a discounted price. The low price is meant to attract as many prospective customers in the target market as possible. Thereafter, as it gains a substantial market share, the company can increase its price to a more favorable one and use distributors to sell the product. It will allow the company to monitor how much revenue is expected from the sale of products in the distribution stores. The company will sell the mobile phones at a specific price to the retailers who in turn sell it to individual customers.
The element of price should be well considered before any decisions are made. It determines the distribution plan which will be used by the company to get its product out there. The use of sales representatives to distribute the product allows them to give demonstrations on the usage of the mobile phone and allows one on one interaction between the company/its representatives and the consumer. Once the price is fixed at some level, the company can use distributors as it is relatively easy to determine the revenue expected. The company can also dictate the price it wants its products to be sold at compared to the competitors within the industry.
Monroe, K.B. (2003). The Pricing Strategy Audit. Cambridge, U.K: Cambridge Strategy Publications.
Perreault, W.D & McCarthy, E.J (2005). Essentials of marketing: a global-managerial approach. New York: McGraw-Hill/Irwin