Pricing strategy
Marketers should develop a pricing strategy for new products to achieve the desired impact in the market and discourage emergence of competition. For the sporting goods company, a penetration pricing strategy is appropriate because it brings in new customers, increases the market share, and builds customer loyalty. The penetration strategy fits for the sporting goods such as baseball gloves, apparels, and tennis rackets among others because they are low-priced items. The penetration strategy involves setting an initial low price, which is lower than the eventual standard price with an aim of attracting new customers (Nagle & Holden, 2002). Usually a price war goes for the deepest price cuts each time to ensure that a marketer’s price is the lowest in the market. Customers often switch to the marketer that offers the lowest price. The strategy works best during the growth phase of a product when the sales are expanding and the product has a positive reputation because other people have used it.
The penetration strategy works well with the sporting goods because the goods are mass-produced, which means a lower cost per unit and hence the ability to begin with an initial low price. The low prices develop positive branding among the first customers that eventually share their views with other potential customers. In the end, the market share for the product increases leading to high sales volume and low production costs. With time, the customer that buys the low-priced product will buy a standard or high-priced related product boosting the sales of the company. The penetration strategy would be appropriate for the sporting goods because they are likely to face stiff competition after introduction to the market. The initial low prices scare competitors that are not willing to price their products at such low prices (Nagle & Holden, 2002). The product demand for the sporting goods is price elastic and hence penetration strategy is suitable.
Pricing tactics
Pricing is one of the most powerful strategies that companies can use to achieve the maximum profits from customers. Pricing tactics enable the business to determine the best price to charge customers to achieve the maximum sales because customers have different tastes and can be willing to pay higher prices than others can. The most appropriate pricing strategy for the sporting goods company would be value pricing. The value pricing strategy enables customers to choose products based on the value they attach to the product. Value pricing is one of the most profitable pricing tactics if the marketer can achieve it because it involves the marketer setting the price based on the perceived value rather than the actual cost (Ferrell & Hartline, 2011). Therefore, the marketer should understand how customers value certain products through evaluation their operations.
The main objective of value pricing is to better align the value achieved with the price. The marketer can customize the price for each individual customer to reflect the specific value offered. This pricing tactic aims at making companies more profitable than using other simpler pricing tactics. In addition, the value-pricing tactic can be used to develop and manage products and configure products to maximize value for particular customers. The customers for sporting goods look for value when purchasing the goods and thus some customers may end up paying more than the others can because of the value they attach to the products even when they serve the same purpose. The company should build value by using the product’s features, advantages and benefits. The value pricing tactic therefore, enables business to understand different value perceptions of customers and maximize sales.
Legal and ethical issues related to pricing tactics
Pricing tactics involve several legal and ethical issues because of their nature. The government often imposes laws to protect consumers and producers from exploitation. The regulations are often in terms of price controls to ensure that marketers do not exploit customers by charging high prices. For instance, it is against the law to charge high prices and when this happens, the government may introduce price ceilings to ensure that companies do not charge customers beyond a certain range. In addition, when the prices are too low, the government may introduce price floors to protect producers from very low prices that cannot generate any margins. These are some of the legal issues related to pricing strategies to protect consumers and producers and ensure fairness in the pricing strategies adopted. For instance, some companies may price a product highly because customers attach high value to the product even though it does not deserve the high price. On the contrary, consumers may also value a product lowly and thus demand low prices yet the product is expensive.
Ethical issues related to pricing tactics include instances when the company charges higher prices to products that do not deserve the high prices. Some business people are unscrupulous and charge high prices even though the value attached to the customer is not high (Forstyth, 2009). Other traders imply a value, which is high in order to attract customers and charge them highly. These are unethical practices some companies engage in with an effort to manipulate customers. Pricing tactics and strategies face these legal and ethical issues because most traders aim at maximizing profits from the highest price possible without considering customers.
Marketing distribution channel
Marketing distribution channels enable goods to move from the producer to the final consumer. In order for the marketer to reach the final consumer, he or she requires assistance from the distribution channels. The distribution channels are often a chain of intermediaries that pass products down the organization until they reach the final consumers. The marketing distribution channel for the products would involve moving them from the producer to wholesaler to distributor then retailer and finally the consumer (Forstyth, 2009). Most manufacturers find it prudent to go through one wholesaler and retailer before reaching the final consumer.
The manufacturer supplies the goods in large quantities to the wholesaler. The wholesaler then breaks the bulk into smaller quantities for the retailers. The distributor in the marketing channel sells goods to the retailers through direct marketing or through brokers. Direct marketing offers unique opportunities for marketers to segment the market according to the needs of the customers and reach the final consumers directly. Intermediaries help distributors to move large quantities to retailers and also break bulk when need arises. In addition, the intermediaries provide support and increase convenience for the distributor by providing additional services. The retailers are the dealers that sell the products to the final consumers and break the products into small quantities convenient for the end consumers (Ferrell & Hartline, 2011). The retailers make sure that the product reaches its final consumer by going to places where the wholesaler or distributor cannot reach. Therefore, the channels in the marketing distribution of a product are interrelated and one may not work efficiently without the other.
Distribution strategy
The strategy of using intermediaries in distributing the sporting goods is suitable for the company. The company produces goods in large quantities and the intermediaries are effective in the distribution strategy. The company may find it challenging to sell the products directly to the final consumer because of their large quantities. The wholesalers, distributors and retailers assist the company in distributing goods to the final consumers by breaking the bulk. These chains of people assist the company in breaking the bulk and ensuring the products reach their final consumers in the most convenient manner. The distribution channels involved assists the company in reaching the target market. The intermediaries involved in the market assist the company in analyzing the market and know the target for its products. The intermediaries usually carry out market research to determine the needs of the target market and the best strategies to use in promoting the company’s products (Forstyth, 2009).
The intermediaries involved in distribution enable the company to determine the best pricing strategies and tactics that can maximize sales, profits and scare aware competitors. During the distribution, marketers learn about the value that customers attach to products and the different categories of consumers, which assist them in pricing the products. Marketers are able to promote the company’s product by adding features that make the products unique and exceptional compared to those of competitors during distribution. Marketing through the distribution informs customers about the various products that the company stocks and it gives them an opportunity to choose among the variety. In this case, the intermediaries involved in distribution help in promoting and informing target consumers about the products that the sporting goods company stocks.
References
Ferrell, O.C. & Hartline, M. (2011).Marketing strategy, 5th Ed. Mason, OH: Cengage Learning.
Forstyth, P. (2009). Marketing: A guide to the fundamentals. Canada: Bloomberg Press.
Nagle, T.T. &Holden, R.K. (2002).The strategy and tactics of pricing: A guide to profitable
decision making. New Jersey: Prentice Hall.
