Assignment 7: Distribution & Pricing Decisions
1. State your product idea and target market.
The product device that looks like a kiwi bird that will help tourists navigate through New Zealand while it provides tourists with fun facts, history, and tourist information. The device plays the role of tour guide and further serves as a marketing (advertising) device. The product is GPKIWI that uses GPS technology to detect location and nearby places. Information fed into the device will be used in relation with GPS location, in order to provide relevant and accurate information. The target market for the device includes travel agencies, tour operators, independent tourists, the ministry of tourism, and tourism board of New Zealand. In addition, since the devices provide opportunity for businesses such as restaurants, shops, and attraction sites to advertise their businesses, they will form part of target market.
2. Distribution strategy - Answer the following questions. (25 marks)
We intend to engage in producer – retailer – customer supply chain. This means customers can purchase the product from retail outlets (Dent, 24). A few selected retail outlets strategically positioned within close proximity to attraction sites, restaurants, and busy tourist sites will serve as distribution channels. In addition, customers will have the option to purchase the device online and have it delivered via courier services.
When does your customer want to purchase your product?
We anticipate that customers will require the product once they schedule to tour New Zealand. There is no specific time that customers will want to purchase the product. However, during peak of tourism, there will be increased demand for the product. Therefore, anytime customers feel like traveling or touring New Zealand, he/she will want to purchase the product.
In what quantities and how often does your customer want to purchase your product?
One product is enough for one customer. However, institutions such as tour operators, tourism board, the ministry, and group of tour agencies may purchase more than one device.
What is your estimated weekly/monthly turnover based upon your target market?
We estimate that sale of a single device will retail at $250. In a day, customers purchasing from retail stores will buy about 15 to 25 devices. In a month, we anticipate to sell 750 devices. However, during peak season, the sale may hit 500 a day, therefore selling 15,000 devices.
What payment method(s) does your customer want to use?
Cash payment method is the most preferable mode of payment. However, customers will to pay via debit card or online payment systems will have opportunity to pay conveniently.
What service support is wanted from your customers?
A team of customer service will be responsible for explaining to customers how to use the device, recharge it, and power it off when not using. In addition, any difficulties arising with using the device shall be addressed through system support facilities put in place.
How will you get your product to the final consumer?
As discussed earlier, retail distributors will avail the product to final consumers. The company shall market the product on social media, adverts, and through public relations, advising potential customers where to get the product. In addition, we intend to make a presentation through public relations to the tourism board and ministry, in order to generate direct sales.
Given the answers to these questions what intermediaries should you use? – online/offline
We shall host online sale points. However, for offline sales, we shall engage retailers who will serve as intermediaries to distribution.
3. What level of distribution intensity should you use and why? (Intensive, selective, exclusive). Refer to page 388 in your textbook. (15 marks)
We advocate for selective distribution strategy. There will be a limited number of outlets within different geographical areas responsible for selling our products. This allows us to select the most appropriate and best-performing retail outlet (Lamb et al, 403). It will also be possible to focus training effort on the selected team. In addition, selective distribution strategy is appropriate because it allows us to manage distribution and make follow-ups efficiently.
3B. What will the intermediaries want from your organization?
Intermediaries proposed for the organization are retail outlets. Suitable candidates for intermediaries include accredited tourist shops, restaurants, and travel agencies. The intermediaries may seek to profit from the business or attract traffic towards their businesses. For instance, shops may want our organization to advertise them in the device information.
4. Explain what pricing objectives best fit your product and why. (20 marks)
Refer pages 278 to 280 in your textbook.
Currently, the business seeks to grow, increase sales volume, establish market share, and create interest and excitement about the device. This is because the business is new in the market and needs to establish and penetrate the market. This is achievable by setting attractive prices.
5. Explain which new product pricing strategy best fits your product idea. Since you are unable to calculate production costs for your product idea, pricing strategies based on customers’ needs should be used. Referring to textbook pages 295 to 299 and lecture notes. (15 marks)
Penetration pricing strategy would best fit our company. This is because it offers cost leadership, attracting customers. Prices in penetration strategy are relevantly lower than that of competitors and attractive.
6. Write down your closest 3 competitors and find out their price, product (and features), and distribution strategies. Put this in a table. What are the implications of your findings? (15 marks)
TripAdvisor: refers to an online website that offers tourists with information regarding destinations and a brief overview of the destination as well as nearby places. The pricing is not disclosed.
Wearable devices: these are GPS powered wearable that provide tourists with location information, nearby resources, and directions. Prices range from $120 upwards (Atembe, 224).
Mobile Apps: these refer to user-installed apps that provide tourists with navigation around. They provide information on attraction sites, fun facts of the destinations, history, as well as nearby places. Prices are as low as $10.
7. Based on the decisions for questions above and your research, state the recommended retail price of your product. (10 marks)
Considering competition and functionalities of devices provided by competitors, we find out that our product provides superior services to customers. In addition, the device is entertaining to users. Therefore, a price of $170 would rival with competitors and attract customers.
Works Cited
Atembe Roland. The use of smart technology in tourism: evidence from wearable devices. Journal of tourism and Hospitality Management. 2015. Vol. 3(11) 224-234.
Dent, Julian. Distribution channels: Understanding and managing channels to market. Kogan Page Publishers, 2011. Pp. 24-39
Lamb, Charles, Joe Hair, and Carl McDaniel. Essentials of marketing. Cengage Learning, 2011. 402-404
