Price
Price is very important when selling a product as it creates sales revenue. It has to be high enough to cover costs and make a profit but low enough to attract customers. Customers need to be able to afford to buy the product and think they are getting value for money. Researching consumers' opinions about pricing is important as it indicates how they value what they are looking for as well as what they want to pay. There are different pricing strategies companies need to decide on before marketing a product. Below I have listed different types of pricing strategies and there meaning:
Source taken from
“Penetration pricing: Where the organisation sets a low price to increase sales and market share.
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
Competition pricing: Setting a price in comparison with competitors.
Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.
Bundle Pricing: The organisation bundles a group of products at a reduced price.
Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200
Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, Porsche etc.
Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.”
Place
Where is the product going to be manufactured? Will it be mass produced? Will it be made in an area where everyone can buy it? Can the product be distributed out easy from the place where the product is being manufactured? All these questions need to be took in to consideration when making a decision on a place, as it has to fit in with your budget and meet your target audience’s needs. You have to make sure a product is getting to the customer in the most effective way.
When a product is ready to be sold you have to make sure it is marketed in the right place. E.g. The product could be on the middle shelf at the front of the store so all customers see it when they walk in.
All companies have to think about the channel of distribution they will use when producing a product. There are 2 types of distribution methods; indirect distribution and direct distribution.
Indirect Distribution
Direct Distribution
With direct distribution, the manufactures can just use the method ‘plus proffit’ where after the costs of making the product, they can just add their own profit on to the consumer price. Direct distribution cuts out 2 of the distribution channels (Whole Saler and retailer) therefore it may make the product cheaper than if it went through indirect distribution, which will be an over all benefit for the customers. Another advantage of direct distribution is that it gives the manufacture complete control of its own product and its pricing.
E.g. Dell use direct distribution as they don’t sell through agents, they sell direct to the public. They make their own electricals at their factory and then put them in their stores to sell to the consumers.
Indirect distribution is where the manufactures sell to whole salers to make profit. Then the whole salers sell to retailers to make profit. Then the retailers sell the products to the consumers to make profit. It is a long process which adds price on to the products at the end.
With all of the above concepts of marketing you have to keep ‘on the ball’ with what customers are looking for; where they see advertisements, what they are buying, what’s in and what’s not and reasonable prices. You have to make out you’re the best business out there.
P2. Describe how the concept and principles are applied to the marketing of products in two organisations
I am going to describe how the concept and principles are applied to the marketing of products from Tesco and Car Phone Warehouse.
Tesco
Tesco apply the concept and principles of marketing to its products in a very effective way and is proved so as it is a multinational company; ‘with 519 stores throughout England, Scotland and Wales. There are also 105 stores in France operated by Catteau, and 44 in Hungary operated by Global.’ The range of products Tesco has to offer without a doubt keeps up with consumers wants and needs. Tesco’s marketing decisions generally fall in to the marketing mix.
Tesco’s Aim:
http://www.tescocorporate.com/plc/about_us/values/
‘Our core purpose is to create value for customers to earn their lifetime loyalty Aims.’
Tesco’s Objectives:
- Understand customers
- Be first to meet their needs
- To be a successful international retailer
- To grow the core UK business
- To develop retailing services - such as Tesco Personal Finance, Telecoms and Tesco.com
- Deliver strong sustainable long-term growth by following the customer into large expanding markets at home – such as financial services, non-food and telecoms – and new markets abroad, initially in Central Europe and Asia, and more recently in the United States.
http://www.tesco.com/investorInformation/report95/corpobj.html
Products
When Tesco produce a product, the first thing they have to think about it the target market. They have to make sure that the product they are producing has attractive features, a good product design (which may be the unique selling point), good quality and amazing features so it meets consumers wants and needs.
As soon as you log on to Tesco’s website you bombarded with images and words of their products. It offers a huge range of products such as groceries, entertainment & books, clothing, phones, banking & insurance, electrical goods, furniture & kitchen, DIY & car, clothing & jewellery, toys & gifts, baby & toddler and garden. They offer such a range of products that it should tailor to everyone’s needs, hence why it is a multinational organisation, making millions of pounds a day.
Example of a product from Tesco and how they use their product strategies to pull in customers
“http://direct.tesco.com/product/images/?R=208-6307”
Who is the product aimed at?
This product is aimed at young girls who want a TV for their bedroom. You can tell so as the TV is pink and has a Disney theme to it (and the majority of young girls love the colour pink and Disney). The colour catches the eye immediately therefore it will attract its target audience. The product is also aimed at parents/carers as they are going to be the ones buying this item in the first place. They aim the product at them also by showing on the image that there is a built in DVD player.
What benefits will they expect?
Parents benefit from this product as they hope their child will like the TV. A feature the TV has got is a built in DVD player therefore the child gets the benefit of being able to watch DVD’s at any time. The customer expects a high quality product for their child which should be very reliable. Tesco do so and create a good name for themselves.
What differential advantage will the product offer over their competitors?
This product is tailord especialy for young children and it is pink so it should make consumers come and bu the product from Tesco rather than their competitors. The TV offers lots of fetures and is listed on the website. They have made sure they have stated all of the products fetures and do so for all of their producs, giving it them competitive edge on all of their products.
“Fetures took from ”
Unique sellig points to attract the customer
Tesco market all their products in this way making sure the item being sold matches up to the target audience intended.
Price
Tesco have used a range of pricing stratagies to draw consumers in to this product. They have used Psychological pricing, Optional pricing, Competition pricing and Skimming pricing. As you can see from the picture above they have used skimming pricing. It shows the price the product was before and that it has come down in price. It was £179.97 and now it is £149.00. What Tesco have done is they set an initial high price and then slowly lowered it to make the product available to a wider target market. They have listed the new price in a red to attract the target audience’s eye and make them think this is a ‘bargain’. It has also listed how much they save in a bold text to make them think ‘wow, I really am getting my moneys worth here’. The skimming pricing strategy Tesco have used on this product does make them think they are getting their value for money.
Psychological pricing has also been used on the above product. They have charged £149.00 for the TV instead of £150.00 as £149 sounds cheaper and looks cheaper.
Optional pricing – Tesco use the optional pricing strategy with this product as they offer 50% of a full motion TV Bracket if you buy a TV from them.
Competition pricing – I searched this TV product online and no major stores sold this TV therefore it is a unique buy. I typed the product on to Google and you could buy the TV new from amazon.co.uk for £189.99. Tesco have beaten their competition straight away by offering this product for £149.00 saving the buyer £40.99, which is a big amount. Customers may think of spending this saving on the optional pricing stratergy advertised; the 50% of a TV bracket.
Place (Distribution)
Distribution is about getting products to the customer in an effective way. Tesco use indirect distribution. Eg.
Tesco’s make it easy for customers to obtain products.They have warehouses all over the UK where they store masses of products.
As there are 519 stores in the UK it is very likley there is a tesco local to all consumers, therefore they can just wlak into a local store and purchase products they need. If you buy big products in store (such as TV’s, fidges, washingmachines) tesco offer home delivery.
Another way to obtain products from Tesco is their online website. You can order products from . They have a easy use website to purchase items from and get them delivered to your home. You can pay extra money to get it delivered next day but standard delivery is 3-4 days.
When you go on to the tesco website to look for a TV, you can see straight away where it says ‘sound & vision’ therefore it is easy to acsess TV products. If the target audience if looking for a TV for their child the first thing what comes up is the above product (The pink TV). An image of the TV is possitioned in the middle of the page for it to attract the audiences eye. As you see the bright pink straight away you think of a female or a child so it has attracted its target audience. All you have to do is click on the TV image and you can buy it there and then making it very easy to purchase.
You can purchase this product from Amazon but Tesco try to offer a better service so that you buy it from them. They have priced it cheaper and give free delivery therefore consumers are more likley to purchase the TV from .
Promotion
Tesco's success comes from appealing to a wide market. They promote their products to all types of audiences. They have many ways of promoting products. They advertise their products on TV, internet advertisments, Post, Club card points (this is where you buy a product from the store and get points, then you can spend the points on other items and get money off), emailm magazines, newspapers and billboards. Within their advertising they always promote special products with price offers. This is to get the buyer interested. Tesco promote their store in such a variety of ways so all target audiences notice them. This is what makes them so sucsessfull.
How do they promote the TV?
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Internet – When you go on to their website and see this product straight away you are drawn to the ‘£149.00’ text. They are trying to make you notice this price as it is in the colour red. The colour red is alerting. It is as if they are making out that it is not going to be this price for long. They also use this technique with the ‘298 Club card points’ text. Regular shoppers at Tesco value club card points. This is because every time they shop there and get these points, they get money of products they buy next time (depending on how many points they have consumed). It also states on the website how much the product was and now is. It then states how much money you save in black bold writing. This is done to appeal to the consumer as Tesco want you to think your saving money and give Tesco an overall good impression.
- Advertising – Tesco adveritse this TV in many ways. They have shown it on TV adverts. This goes out to a national audience. When advertisising it on TV they make sure they state how much the product was, how much it has been redued by and how much you save. They are making the target audince think, “wow, you save that much money, what a great offer”.
- Sales Promotions – Tesco offer 50% of any wall bracket when you purcase a TV.
- Club Card Points – Tesco offer double club card points when you buy this product. This attracts consumers as club card points gives them money off other products. Customers which have a club card benefit Tesco as Tesco then have information on what consumers are buying.
- Personal selling – When you walk in to the electrical part of a Tesco store they will always have sales representatives to talk to you and advise you on what product to buy.
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Public Relations – Public Relations is defined as 'the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics' (Institute of Public Relations).
- Trade Fairs and Exhibitions –
- Sponsorship – Tesco sponsor Wigan Warriors Rugby League Club. The sponsorship, worth £3.25 million over five years, is the most valuable club sponsorship in the history of Rugby League and confirms the company as principal sponsor and business partner of the famous Rugby League Club. Sponsorships benefit both parties. Wigan Warriors will now promote Tesco and it now makes Tesco looks good.
Target Audience
The TV tesco have promoted is aimed for youung girls up to aged 14. You can tell this beacause of the colour of the TV and disney pircture on the front.
