Effective Product Pricing and Marketing Channel Strategies

Product Mix Pricing Strategies

2. Optional Product Pricing

Companies offer to sell optional accessory products along with the main product. Example: A car buyer choosing to add GPS or Bluetooth.

3. Captive Product Pricing

Companies that make products that must be used along with a main product use captive product pricing. Examples: Razor blades, cartridges, consoles, printers, and Nespresso pods.

4. Product Bundle Pricing

Sellers often combine several products and offer the bundle at a reduced price. Examples: Phone service packages, restaurant menus, etc.

Price Adjustment Strategies

1. Discount and Allowance Pricing

Most companies adjust their basic price to reward customers for certain responses, such as early payment of bills, volume purchases, and off-season buying. Example: Seasonal discounts at outlets.

2. Segmented Pricing

Adjusting prices to account for differences in customers, products, or locations. The company sells a product or service at two or more prices, even though the difference in price is not based on differences in costs. Examples: Museums, cinema tickets, youth discounts, children's free entry, and senior discounts.

3. Psychological Pricing

Adjusting prices for psychological effect. Example: Some people are willing to pay $100 for a bottle of perfume containing $3 worth of scent because the price indicates quality; this is known as reference pricing.

4. Promotional Pricing

Temporarily reducing prices below list, and even below costs, to increase short-run sales. It takes several forms, including:

• Discounts
• Special-event pricing
• Limited-time offers
• Cash rebates
• Low-interest financing
• Longer warranties
• Free maintenance

5. Geographical Pricing

Companies must decide how to price products for customers in different parts of the world. Strategies include:

• Basing-point pricing: Selecting a city as a base and charging all customers the freight cost from that city (e.g., Big Mac prices vary by country).
• Uniform pricing: Charging the same price in all locations (e.g., Boeing sells jetliners at roughly the same price everywhere).

6. Dynamic and Internet Pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations, mainly prevalent online. Examples: Airlines, hotels, and eBay.

Marketing Channel Strategies

A marketing channel (distribution channel) is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

Key Channel Functions

Members of the marketing channel perform many key functions:

• Information
• Promotion
• Contact
• Negotiation
• Matching

They also help to complete transactions through:

• Physical distribution
• Financing
• Risk taking

Channel Levels

The number of intermediary levels indicates the length of a channel:

1. Direct marketing channels: Producer to Consumer.
2. Indirect marketing channels: Producer to Retailer to Consumer, or Producer to Wholesaler to Retailer to Consumer.