Key Assignment DraftNow that the product and promotional decisions have been made for the new product, Michelle is concerned about the pricing of the new product and the distribution channels that will be used to make the product available to customers. She has asked you to write a 2-3 page memo outlining two different pricing strategies that MM should consider. Her voice mail message goes on to say,I want you to recommend which strategy you think should be used for the target market and why. The second part of the memo should outline a distribution plan that will make the product available to the target customers.You are ready for Michelle’s request and begin drafting the memo to her that same day.Create and submit a 1–2 page (more is better) memo (excluding cover and reference pages) on the following:
Outlining two different pricing strategies with details/specifics on each
Choosing one of the two pricing strategies for you new cell phone launch – explaining (details/specifics) why you chose the pricing strategy for your new cell phone product;
Explaining with details/specifics the distribution strategies (channels) that will be used to make the product available to customers (the “place” of the “marketing mix:)
Chosen pricing and distribution strategies should show why you think they should be used for the target marketAPA format, and intext citations is a must 2-3 pages (not including cover page or Reference page; double spaced 12-point Times New Roman font)
The student should analyze at least two different pricing strategies or tactics from the text or other sources and choose one. Whichever pricing strategy the student chooses should be defended in the memo, as well. A specific price for the product may earn the student some more points compared to those who did not determine a specific price. In the second part of the paper the student should identify a specific distribution strategy for MM’s product. This should include, but is not exclusive to, where customers will buy the product and how the product will be moved from MM to the customer’s point of purchase
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Competitive Advantage and Pricing Strategies
Building Competitive Advantage: What is your value proposition?
The product strategy is also about positioning the product for competitive
advantage. One way to do this is by developing the product’s value proposition.
The value proposition communicates the product’s benefits to the targeted
markets. Essentially, matching the right message with the right market is the
goal of communicating the value proposition. The purpose of the value
proposition is to state how your product meets the wants and needs of your
customer-targeted markets.
The value proposition helps to build competitive advantage in the marketplace
by communicating the differences, or differentials, of your product versus
others. Value proposition statements identify the target customers, the value
proposition, and key competitors (Good Examples of Positioning Statements,
Developing a unique value proposition entails writing a clear, effective
statement that includes the following:

Identifying the target market who wants or needs the product
Identifying the key benefits of the product
Describing the products or service
Describing how the product is unique or different from the competition
Product Pricing Strategies
The product strategy also includes the marketing P of pricing. Several pricing
strategies exist that can flex based on the product life cycle. The product life
cycle (PLC) includes the following four stages:

Introduction: The sales growth tends to be slow during this stage.
Growth: The market acceptance grows, and sales increase during this
Maturity: The sales growth slows because the market is saturated
during this stage.
Decline: Profits diminish because of better competing products during
this stage.
Pricing can also act as a differentiator in the marketing plan as an agent of
competitive advantage. During the four phases of the product’s life cycle, the
Competitive Advantage and Pricing Strategies
company is concerned with gaining market acceptance.
An example of flexing pricing strategies during the introduction stage of PLC
would be to implement a penetration pricing strategy. This type of strategy sets
an artificially low price in the introduction stage to gain market share, and then
it slowly increases the price as the product gains market acceptance
(Positioning, n.d.).
Good examples of positioning statements. (n.d.). Retrieved from Growth
Connection Web site:
Positioning: As popularized by Al Reis and Jack Trout. (n.d.). Retrieved from
Quick MBA Web site:
Integrated Marketing Communications
Effective Integrated Marketing Communications
Modern marketing calls for more than just developing a good product, pricing it
attractively, and making it available to target customers. Companies must also
communicate with their customers and there should be controlled direction to those
communications. Promotion provides the primary communication function. As one of
the four major elements of the marketing mix, promotion uses advertising, personal
selling, sales promotion, public relations, and direct marketing to achieve the
company’s communication objectives. Place, the last of the four Ps, makes the product
available to customers. Distribution channels are identified as being a set of
independent organizations involved in the process of making a product or service
available for use or consumption by the consumer or business. Making decisions
involving distribution channels are among the most complex and challenging decisions
facing the firm.
There is a need for developing effective integrated marketing communications.
Marketers know that as mass markets have fragmented, a shift is underway away from
mass marketing. In addition, vast improvements in information technology have sped
the movement toward segmented marketing. The result of these two trends is that
companies must now blend promotional elements into an integrated marketing
communications mix that carefully coordinates all the elements of the promotion.
Advertising and Public Relations
Advertising is any paid form of nonpersonal presentation and promotion of ideas,
goods, and services by an identified sponsor. There are five important tasks to be
accomplished as the marketer attempts to organize and direct the advertising function,
including setting objectives, budget decisions, message decisions, media decisions, and
campaign evaluation. The marketing firm can undertake the advertising function itself
or it can contract with an advertising agency to accomplish its advertising objective,
planning, and implementation.
Public relations is an attempt to build good relations with the company’s various
publics by obtaining favorable publicity, building up a good corporate image, and
handling or heading off unfavorable rumors, stories, or events. The organization has a
variety of tools at its disposal for accomplishing this feat. One of the overriding tasks
of public relations is to control the exposure and relationship with the mass media. By
focusing on consumer attitudes, awareness, and knowledge of the organization, the
company is better prepared to succeed.
Personal Selling and Sales Promotions
Robert Louis Stevenson once noted that everyone lives by selling something. Today,
most companies use salespeople to bring their company’s offering to the consuming or
business publics. The salesperson’s role is a key one in the organization. The high cost
of maintaining a sales force means that management is especially interested in how to
efficiently organize this vital element. The following six basic steps or decisions are
important to the sales management process: designing sales force strategy and
structure, recruiting and selecting salespeople, training salespeople, compensating
salespeople, supervising salespeople, and evaluating salespeople.
As an element of the marketing mix, the salesforce is very effective in achieving
certain marketing, communication, and promotion objectives. The formal steps in the
selling process that aid the accomplishment of these objectives are prospecting and
qualifying, preapproach, approach, presentation and demonstration, handling
objections, closing, and follow-up. If the salesperson follows these steps, he or she is
more likely to be viewed as a problem-solver rather than a hard-sell salesperson by the
Great salespeople have drive, discipline, and relationship-building skills. Relationship
marketing is the process of creating, maintaining, and enhancing strong, value-laden
relationships with customers and other stakeholders. Relationships are more important
than mere transactions. Transactions can be completed quickly whereas relationships
can last a lifetime.
Sales promotion is a process of providing short-term incentives to encourage purchase
or sales of a product or service. Sales promotion offers the buyer reasons to buy now.
In addition, sales promotion is also intended to stimulate reseller effectiveness. Sales
promotion has grown rapidly in the recent past because of pressure to increase sales,
increased competition, and the declining efficiency of the other mass communication
Distribution Channels
Each channel system creates a different level of sales and costs. Unlike flexible
elements of the marketing mix, once a distribution channel has been chosen, the firm
must usually stick with its choice for some time. In addition, the chosen channel
strongly affects, and is affected by, the other elements in the marketing mix;
furthermore, a firm needs to identify alternative ways to reach its market.
Channel design begins with assessing customer channel-service needs and company
channel objectives and constraints. The company then identifies the major channel
alternatives in terms of the types of intermediaries, the number of intermediaries, and
the channel responsibilities of each. No system, no matter how well it has been
planned, is without conflict. Managing distribution conflict is a necessity if quality
service and low cost are to be delivered.
In today’s global marketplace, selling a product is sometimes easier than getting it to
customers. Therefore, physical distribution and logistics management are receiving
increased attention from strategic planners. The task of physical distribution systems is
to minimize the total cost of providing a desired level of customer services while
bringing those services to the customer with the maximum amount of speed.
Packaging, Pricing, & Service Levels
After all of the careful marketing studies are complete, after markets are carefully
segmented, after the organizational organization decisions are made, and after the
broad outlines of marketing strategy are defined, it is still necessary to decide exactly
what product or service specifications need to be. Decisions must be made about
packaging, supplemental materials, pricing, and service levels.
Product and Brand Strategies
Product is the first and most important element of the marketing mix. A product is
anything that can be offered to a market for attention, acquisition, use, or consumption
and that might satisfy a want or need. Products can be physical objects, services,
people, places, organizations, and ideas. Product strategy calls for making coordinated
decisions on product mixes, product lines, brands, packaging, and labeling.
Companies should develop brand policies for the individual product items in their
lines. They must decide on product attributes (quality, features, design), whether to
brand at all, whether to do producer or distributor branding, whether to use family
brand names or individual brand names, whether to extend the brand name to new
products, whether to create multiple brands, and whether to reposition any of them.
Service Strategies
As the United States moves increasingly toward a service economy and beyond,
marketers need to know more about marketing service products. Services are activities
or benefits that one party can offer to another that are essentially intangible and do not
result in ownership of anything tangible. Services are intangible, inseparable, variable,
and perishable. Because services generally are intangible, customers perceive them as a
more risky proposition and find evaluation more difficult. Accordingly, they tend to
rely more on personal references or information sources, brand reputation, and the
price and/or facilities of the service provider as an indication of quality. To overcome
these risks and perceptions, marketers must reduce the complexity involved with the
service, stress the positive elements of tangibility in the service, make all
communications with the customer very clear and unambiguous, and focus constantly
on service quality.
Pricing Strategies
Price has become one of the more important marketing variables. Despite the increased
role of nonprice factors in the modern marketing process, price is a critical marketing
element, especially in markets characterized by monopolistic competition or oligopoly.
In setting the price of a product, the company should follow a six-step procedure:
1. Establish a marketing objective.
2. Determine the demand schedule.
3. Estimate how the product’s costs vary at different output levels, production
levels, different marketing strategies, differing marketing offers, and target
costing based on market research.
4. Examine competitors’ prices as a basis for positioning product price.
5. Select a pricing method, such as markup pricing, target return pricing,
perceived-value pricing, value-pricing, going-rate pricing, and sealed-bid
6. Select the final price.
Pricing involves the customer demand schedule, the cost function, and competitors’
prices. The question is how should a company integrate cost-, demand-, and
competition-based pricing considerations? In setting a price, the firm will have to
consider the following cost, demand-, and competition-based pricing decisions:
Cost-based pricing decisions, using marginal analysis or break-even analysis
Demand-based pricing decisions, such as type of demand for the product,
changes in buyer attitude toward price with changes in the economic
environment, and the elasticity of demand
Competition-based pricing decisions. To set prices effectively, an organization
must be aware of the prices charged by competitors.
Pricing Strategy
Setting Prices
In the calculation of prices, marketers must consider the influence of both internal and
external factors. Internal factors include pricing objectives, costs, and strategies of
other elements of the marketing mix. The costs of manufacturing the product, the costs
of distributing the product through the channel, and the costs of communicating the
product to the target market are all variable and subject to external influence. External
factors include the demand for the product, the competitive environment, and the
economy. The marketer must analyze the consumer’s sensitivity toward prices and
evaluate the psychological aspects of pricing his or her products. Because the marketer
must incorporate the costs associated with all the factors of the marketing mix, setting
the price is the last activity for the marketer in putting together the marketing strategy.
Product and Distribution Costs
When setting the price of a product, we need to estimate the total production cost of the
product based on the sales forecast. Sales forecasts require intensive research of the
market potential of the product, allowing total production costs to be estimated by
calculating the fixed and variable costs for each unit sold. Distribution costs must
include estimates of costs through all channels that will be used including middlemen
costs and any tax-related costs such as the value added tax imposed in some countries
as goods pass through channels (Cateora & Graham, 2005). It is important to recognize
that cost estimates are based on extensive research, previous experience, and the
marketer’s best judgment.
Communication Costs
The cost of communicating the product’s message includes the cost of designing the
message and the cost of buying the media. Typically, though, companies hire
advertising agencies to design the message and arrange for media selection and
purchase. Therefore, the advertising agency’s billing will include the costs of both
design and placement. Depending on the company’s promotional strategy and the
nature of the product, communication costs can be substantial.
Pricing Strategies
There are two major strategies to pricing a new product: penetration and skimming.
Penetration consists of pricing the product at a low rate with the intent of
accomplishing three goals: discouraging the competition from entering the market,
gaining market share, and increasing flexibility in pricing the product in the future. We
discourage competitors when we lower prices: This gives the impression that profit
margins will be small. Likewise, a lower price helps build support for the product and
build target market base. In addition, starting at a low-price position creates the
flexibility to increase prices when the competitive environment permits it.
Skimming consists of entering the market with a high price and selling to the market’s
wealthier consumers at higher margins. The goals of skimming are to recover the costs
of expensive product development as soon as possible and establish the product as
premium or unique in the mind of the consumer.
Setting Prices Internationally
Establishing prices in an export-marketing context requires adding the costs of
transporting the product and navigating trade requirements. Typically, the additional
costs include customs charges, tariffs, freight, insurance, and warehousing. These costs
are negotiable between the exporter and the importer and are summarized in the terms
of sale. Internationally, terms of sale are referred to as international commerce terms
Whether a marketer is exporting or not, he or she may use one of two types of
international pricing strategies: standardized pricing and customized pricing.
Standardized pricing involves the decision to use an equivalent price in all country
markets. One advantage of this strategy is that the same price across country markets is
easier to administer. Customized pricing, on the other hand, involves setting unique
prices for each country market and meeting the specific pricing needs of each local
market when each has a significantly different environment and perception toward
Cateora, P. R., & Graham, J. L. (2005). International marketing (12th ed.). Boston:
The 4 Ps of the Marketing Mix
• Know it better than
• Where are you selling?
• How much does it cost?
• Tell your audience about

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