Pricing Strategies and Marketing Channel

This paper is to explain some of the role in the Pricing Strategies and the Marketing Channels

I will be explaining four steps for setting an initial price for a product or service, which are selecting the pricing objective, estimating cost, selecting a pricing method, and determining demand. I will be explaining four ways an organization can respond to a competitors price change, they are maintain price and profit, maintain price and add value, reduce price, and increase price and add brands.

There will be an explanation on how effective health care delivery channels can be designed, which involves a complex set of channel members.

There will also be a description of four main decisions that companies face in managing their channels which are selecting channel members, training channel members, motivating channel members, and evaluating channel members. Explain at least four of the seven steps for setting an initial price for a product or service? Selecting the pricing objective is deciding where it wants to position its market offering.

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Survival, maximum current profit, maximum market share, maximum market skimming, or product-quality leadership are five major objectives that a company can pursue through its pricing.

A company’s choice of objective is strategically important. A company usually can’t attain more than one objective simultaneously. Estimating Cost is where demand sets a ceiling on the price a company can charge for its product or service and cost sets the floor the price that the organization needs to charge has to cover its cost of producing, distributing, and selling the product.

A company’s cost can be expressed in a number of ways. Fixed cost are cost that do not vary with production or sales revenue, regardless of output and subject to capacity constraints.

Variable cost varies directly with the level of production. With fixed cost you can’t determine per unit costs without specifying a volume of output. A company cannot price below its variable cost and expect to stay in business for long. Selecting a pricing method there’s three C’s to price production. Customers value assessment of unique features establishes the price ceiling. Cost sets the floor for the price. Competitors prices and the price of substitutes provide an orienting point. Markup pricing, target-return pricing, value pricing, and going-rate pricing are four price setting methods used.

Adding a standard markup to the products cost is markup pricing. The pricing method that would yield its target rate of return on investment (ROI) is target-return pricing. Prices that are based on customers perceived value of their product or service is valued pricing. Pricing based largely on competitors prices are going-rate pricing. Determining demand in health care services and products, the quantity demand does not always change with increased prices. Price sensitivity is the first step in estimating demand is to understand what affects price sensitivity.

Usually customers are most price sensitive when products are very costly or bought frequently. Consumers are less price sensitive to low-cost or infrequently purchased items. Demand has to be estimated with three methods. The first method is analyzing past data and their relationships to each other, such as prices, units sold, referrals, admissions, visits, and procedures. The second method is conducting field experiments to observe the effects of varying prices on the same products in different, but similar markets.

The third method is using prospective surveys to explore how likely consumers say they are to buy unique essay at different proposed prices. Explain at least four ways an organization can respond to a competitors price change?

Maintain price and profit margin: the leader can maintain its price and profit margin, believing that

(1) it will lose too much profit if it reduced its price,

(2) it will not lose much market share to the competitor, and

(3) it could regain market share when necessary. Maintain price and value: the leader can improve its product, service, or communications.

They may find it cheaper to maintain price and spend money to improve perceived quality rather than cut price and operate at a lower margin, also it can draw on brand loyalty. Reduce price: the leader can lower its price to match the competitor price. If the firm needs to maintain a certain production volume to hold down its cost and also if it anticipates difficulty in regaining market share once it is lost then this strategy would be used. Increased price and add brands: this is when the leader can raise the price and introduce a new brand to bracket the brands that are being targeted or attacked. The best response varies in the situation.

The company’s products stage in the life cycle is consider, the company should anticipate competitor’s possible price changes and prepare contingent responses in advance. Describe how effective health care delivery channels can be designed? Delivering efficient health care involves the cooperation of a complex set of channel members. Between producers and final users stand one or more marketing channels consisting of a host of marketing intermediaries that perform a variety of functions, The most important being information provision, promotion, negotiation, ordering, financing, risk taking, physical possession payments, and assuming title.

Designing a market channel system involves analyzing customer needs, establishing channel objectives, identifying major channel alternatives, and evaluating major channel alternative. marketers must understand the service output level target customers desire. Lot size: the number of units the channel permits a typical customer to purchase on one occasion. Waiting and delivery time: average time customers of this channel waits for receipt of goods or a service. This is a desirable feature for hospitals emergency rooms, where patients are often in pain.

Spatial convenience: the marketing channel makes it easy for its customers to purchase the product. Product variety: an assortment provided by marketing channels, customers prefer an assortment because it increases their chances in finding what they want or need. Service back-up: the add on service such as (credit, delivery, installation, repairs) provided by the channel. Describe the four main decisions that companies face in managing their channels? Selecting channel members: channel members represent the company to the customers, so the organization has to select their channel members carefully.

Training channel members: training programs need to be plan and implemented carefully for the intermediaries. Motivating channel members: companies must regard their intermediaries in the same way they regard their end user. That is identifying their needs and tailoring their channel positioning to provide them superior value. Evaluating channel members: intermediaries must be periodically evaluated on performance against such standards as sale quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs.