Pricing and Distribution Strategies: A Business Analysis

Pricing Strategies

Price is the consideration that the consumer is willing to give in exchange for a product.

Three Key Pricing Strategies:

1. Penetration Pricing: Entering the market with low pricing, often in a "closed market." The disadvantage is that these prices are below the optimal price, making it difficult to raise them later. Raising prices after establishing a low price can lead to a decrease in demand.
2. Maximum Pricing: Setting very high prices to maintain a premium image, potentially sacrificing sales volume. This policy is often short-term, as competitors may offer lower prices.
3. Undertaking Prices: This strategy doesn't define the true price initially. It allows for price increases without significant impact because the initial price wasn't perceived as the true value. The goal is to obscure the future price of the product from the consumer.

To achieve sufficient demand and avoid being overwhelmed by competition, companies often implement well-known policies:

• Discount policies
• Bonus policies
• Rebates

Distribution Business

Distribution refers to the activities conducted from the moment a product is prepared until it is in the possession of the consumer or end-user.

Distribution bridges the gap between production and consumption.

Functions of Commercial Distribution

The most important functions involved in an effective and rationally designed distribution system are:

1. Transportation and Diffusion of Production: Products must be moved from where they are prepared to the place of consumption.
2. Grouping Products for Sales: Dividing products into portions to meet customer needs. Distribution should also provide an adequate supply and a variety of products tailored to consumer situations from various manufacturers.
3. Storage: Storing products to meet demands at a specific point in time.
4. Services Provided: Training, promotion, customer advice, installation, repair, maintenance, product delivery, etc.