Assignment #3 Pricing Strategy and Channel Distribution
Marketing Management – MKT 500
February 15, 2012
Pricing Strategy and Channel Distribution
Determine and discuss a pricing strategy (Skimming and Penetration).
One of the four major elements of the marketing mix is price. Pricing is very important strategic element. The pricing strategies impinge on featuring products, channel decisions, and promotions. This strategy helps marketers set prices. (Pride, Hughes, & Kapoor, 2011) There are many ways to price a product. Two commonly known pricing strategies are skimming and penetration. Lavishness Hair Studio is likely to use one or both of them over a calculated ...view middle of the document...
Management will research and analyze competitors in the area hair service costs and set prices accordingly to attract potential customers by word of mouth. There are several different types of prices used in penetration strategies: restrained prices, elimination prices, promotional prices, and keep-out prices. (Pride, Hughes, & Kapoor, 2011) Lavishness Hair Studio will set promotional prices over a period of time offering clients either15, 20, or 25 percent off regular service prices in order to build market share and customer loyalty. Overall, Lavishness Hair Studio will use penetration pricing during the initial opening of the business, pricing strategies will adjust as demand changes.
Determine and discuss pricing tactics (Product line pricing, Value pricing, Differential pricing, or Competing against private brands) to be used for your product.
Pricing is a vital force in marketing management. Different pricing tactics such as product line pricing, value pricing, differential pricing, ect… assists in attracting more clients and maximizes profits. (Pride, Hughes, & Kapoor, 2011) Lavishness Hair Studio will use product line pricing. This strategy will allow the business to advertise services, starting at different pricing points based on the depth of service features and benefits acquired by the clients. For example, the professionals at Lavishness Hair Studio will provide clients with three services: Lavishness Silver, Lavishness Gold, and Lavishness Platinum. The services are designed to meet client’s individual needs and wants. Clients will experience the same level of upscale service; however, the value of offerings will change depending on each selection. The Lavishness Silver line will be priced low for basic services such as a basic shampoo, cut, trim, or style. The Lavishness Gold line will feature services such as perms, relaxers, hair-straightening, color, and classic styles in which will cost a little more. Lastly, the Lavishness Platinum line will feature services such hair braiding, extensions, premium hair styles, and private room services in which will be the most expensive in cost. The goal of the product line pricing is to maximize profits. The more added features to the basic offerings, the more clients are willing to spend.
Identify any legal and ethical issues related to the pricing tactics.
There are legal and ethical concerns that may limit pricing decisions in business. The use of penetration pricing can raise some legal and ethical concerns. Penetration pricing is a pricing strategy where a company sets a low price on a new product in an attempt to gain market share, typically with the intention of raising prices in the future. (Hamel, 2012) The purpose of penetration pricing is to attract customers away from competitors with low initial prices on products or services. The strategy of penetration pricing can raise legal concerns if it interferes with competition. In the United States,...