10 Jun DEFINE AND DISCUSS THE DIFFERENCE BETWEEN VALUE-BASED PRICING AND COST-BASED
On Pricing
Define and discuss the difference between value-based pricing and cost-based What are
strengths and weaknesses of each method? Explain in detail.
Value-based pricing uses buyer’s perceptions of value as the key to pricing.
Good value pricing (offer a right combination of quality and service at a fair price) (Hyundai Assurance)
Value-added pricing (attach value-added features and services to differentiate the product while charging a higher price) (Whole Foods, Trader Joe’s)
Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
Describe how your project company currently prices its main products or services. Is this the best
method? Why or why not?
Apple Company iPhone 6
Comment on the traditional approaches of skimming and penetrating in your discussion
as they would apply to your product/brand/company.
Market-skimming pricing: Setting a high price for a new product to skim maximize revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.
Marketing-penetration pricing: Setting a low price for a new product to attract a large number of buyers and a large market share.
On Distribution –
How does a vertical marketing system differ from a horizontal marketing system? Explain in detail.
Vertical marketing system: A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.
It provides channel leadership
Horizontal marketing system: A channel arrangement in which two or more companies at same level join together to exploit a new marketing opportunity. (Wal-Mart & McDonalds)
What system best describes your project company’s distribution approach?
Apple iPhone 6
Identify your company’s primary marketing channel’s strengths and weaknesses?
Apple iPhone 6
Include an analysis on where you think your company can cut costs while also providing more value from manufacturing to final retail.
Recall that the many channels along the way are most often separate businesses each trying to maximize value for its own customer while also maximizing profit for itself. Think of this important phenomenon as you shape your discussion on distribution management.
Marketing channel is a set of interdependent organizations that help make a product or service available for use by the consumer. There are three levels in marketing channel. Level one channel, which is direct to market, includes telemarketing, direct mail, door to door, TV selling and home parties. Level two channels, which is indirect to market, contains one selling intermediary, such as a retailer. Level three channels, which is indirect to market, contains two intermediaries.
There are numbers of intermediaries:
Exclusive distribution: producer selects only one intermediary. For example, luxury goods such as Louis Vuitton use exclusive distribution. Producer only provides their products for LV store.
Selective distribution: producer selects a few intermediaries. For example, electronic devices companies select Bestbuy, Target and a few stores to sell their products.
Intensive distribution: producer selects a majority of outlets. For example, Coca-Cola is sold in many stores.
Crest 3D Whitening toothpaste is sold through intensive distribution. Almost every store sells Crest toothpaste. P&G selects a majority of outlets to sell crest toothpaste. By this way, P&G can receive great revenue because of these outlets. However, P&G spends a lot of money on transportation every year. P&G has to transfer the Crest toothpaste to its wholesalers and retailers. Therefore, I think P&G should transfer goods directly to retailers instead of wholesalers. By this way, P&G can cut costs but provide more value to consumers.
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