Price and Channel Strategy
Dennis E. Gamarra
Instructor: Meraj Khan
MKT / 571 Marketing
February 24, 2020
Price and Channel Strategy
Price settings refer to the process of setting up the cost of a product to the consumer. Price setting generally means the process of coming up with a value the consumers have to pay to acquire a product. Channel strategy, on the other hand, refers to a vendor's plan for moving a product through the market chain to the final customer. A channel strategy aims at exposing a companies product to a potential buyer in the market. Distribution is a general term that is used to mean the action of sharing something or making something available to costumers. The concept of pricing and distribution in business work interdependently in the market (Cohen and Neubert 2017) Distribution pricing is the price at which the business chooses to sell its products to vendors who will distribute the product
In measuring profitability, standard metrics used are earnings before interest, taxes, depreciation, and amortization. All measures of the business profitability begin from the revenue. Revenue is the income that is generated from the sales of goods. Product pricing has an impact on profitability at every level. In the market, an increase in the price of a product creates a corresponding increase in revenue. Revenue increase increases business profit. Gross profits increases when there is an increase in revenue. Gross benefits are gained through total revenue collected less than the total cost of the product. Market distribution increases the profits of a business by increasing the number of sales in the market. An increase in sales gives a corresponding increase in the total revenue. Market share distribution will mean that the business will sell more of its products, which ultimately increases the revenue of the company. Business revenue determines the profits of a business. An increase in market share increases product sales, which leads to an increase in sales.
Distribution of products varies, giving rise to different strategies in the market. Distribution talks of how products move from the manufacturer to the end customer, cost, and time of the distribution and the competitive advantage of the distribution employed. Indirect involves products reaching the customer through numerous channels. The chain is long, and the company has to sell at a price that will favor the chain. Direct distribution is where the business directly sells the product to customers. This strategy gives a better chance of high revenue collection. Intensive distribution involves having a mass marketing product. It entails reaching the market at all possible levels. The distribution technique used determines the sales in the market (He, Rong and Shen 2020)
The pricing strategies in a company include penetrate, skim, and follow. Depending on the type of marketing strategy being employed, the pricing has to be made. Penetrate involves the setting of a low price, giving value to customers. Penetrate give the business maximum profits. Skim consists of setting a high price to show product value and capture maximum revenue. Follow pricing strategy consists of fixing the price of commodities depending on the price set by competitors in the market. The price strategy greatly determines the sales in the product market. Price strategies build the product name in the market, helping in product marketing. A good pricing strategy will impact on product distribution, which relatively has implications on the sales.
In ensuring high product sales in the market, positioning within the channel is considered. Corrective positioning solves the four Ps of marketing, product, price, promotion, and place. The company's interest is always to make profits large enough to ensure the growth of the business. The sales in company products are determined by the product, price of the commodity. High product sales generate much revenue for the company. The cost of the products determines the number of purchases and, subsequently, the amount of revenue that will be collected. High product sales and high prices generate high revenue. High income ensures the high profitability of the business.
References
Cohen, B., & Neubert, M. (2017, September). Price-setting strategies for product innovations in the Medtech industry. In the 10th annual conference of the EuroMed Academy of business (pp. 459-473).
He, L., Rong, Y., & Shen, Z. J. M. (2020). Product Sourcing and Distribution Strategies under Supply Disruption and Recall Risks. Production and Operations Management.