MARKETING PLAN

Pricing Strategy and Channel Distribution

Pricing Strategy and Channel Distribution

Introduction

Every marketing plan needs guiding principles. Based on the knowledge gleaned from the target market analysis, entrepreneurs need to position the product accordingly. Product strategies depend on purchases. An entrepreneur needs to decide where his product fits (or where he would like to position it) as this influences the other aspects of the marketing plan. Determining how to price your product is always difficult. In the traditional way, main emphasis placed on the development of the product, channel of distribution and advertising, least consideration given to price ultimately importance of pricing realized by companies as it determine the target market and includes the profitability element in it (Myers, 2001). It is the core decision of every business plan, and it considered as the major component of a marketing plan Ingredients of pricing.

Pricing Strategy

Pricing strategy is a key ingredient in how firms advertise and communicate their products and services in international markets.

Penetration

Process of lowering the price relative to the product value and the price of competitors called price penetration. Tesco considers price as their ultimate weapon of achieving the competitive advantage. Tesco has been using this strategy for a multitude of years by keeping the prices at a lower level (Mahajan, 2006). It requires Tesco to a system of extensive marketing technique, and a simulative interest in the market through active promotional activities and above all relevant production capabilities. This is a strategy designed for the large initial investments, such as Tesco, that are not promptly returned. This strategy has become a USP for Tesco.

Pricing Tactics

The product structure has to be simple so that all attributes represents the product line.

Product- line Pricing

Tesco keep the price of the products low because they have large product line. It has 50,000 product lines. The operation's scale is phenomenal. In some cases, the some strategies of Tesco are not based on their position in the market, but they primarily focus on relationships among products in the product line. This strategy refers to the offering of merchandise at a number of predetermined prices. Tesco is cutting prices in half on 1,000 product lines to have biggest sales for Christmas this year. Tesco's focus on non-food items has led some to wonder whether it is fair to compare Tesco with the other grocery retailers at all as it seems to have become a consumer goods company (Kotler, 2006).

Value-based Pricing

This strategy is not that much relevant to Tesco, as most of the strategy's part is based on making the prices lower. This pricing strategy uses the consumers' perceived value of a good to establish price. In contrast to the preceding strategies that focus on the cost to determine the price, this strategy addresses the relative value of the product to the consumer. The firm begins by identifying the desired benefits and relative costs of a product; then the value assessment can he determined. Thus, the various facets of benefits and the multiple facets of cost are used to ...