Assignment 3: Pricing Strategy and Channel Distribution
Assignment 3: Pricing Strategy and Channel Distribution
1. Determine and discuss a pricing strategy (Penetration and Skimming)
The penetration pricing strategy approach is what we are going use to represent our SONO water filter products in today’s market. Since it serves as many customers as possible representing different valua-tions, this pric¬ing model will be our best option.
The advantage this approach holds for us is the low volume customers, who presumably have a relatively lower valu¬ation for water consumption, will purchase fewer replacement filters. Conversely, high volume customers, who presumably have a larger consumption rate than single families will pur-chase more cartridges. The result will be making more money on the high valuation consum¬ers, as the price for the pitchers will be reasonably cheap for both the target consumers. It’s a brilliant pric¬ing strategy that captures the value cus¬tomers place on our product. In other words we will be approaching the market with the razor/razor blade model.2
2. Determine and discuss pricing tactics (product line pricing, Value pricing, Differential pricing, or Competing against private brands) to be used for your product.
Since Sono Filter brand name and logo has enormous recognition in the Asian Market our objective will be introducing it as a new manufacture in the United States and to become a brand of choice during consumers purchasing decision.
The private labeling will become a significant component of the water filtration industry and that a plethora of distributors will undertake such initiative. We believe that our private labeling can provide us as a distributor with opportunities to compete against private brands such as Brita, enabling us to sell lower cost products to gain market share and potentially generate significantly higher gross margins. And since we have chosen a penetration pricing strategy low initial price setting is our main objective compared to many competitive
1. Determine and discuss a pricing strategy (Penetration and Skimming)
The penetration pricing strategy approach is what we are going use to represent our SONO water filter products in today’s market. Since it serves as many customers as possible representing different valua-tions, this pric¬ing model will be our best option.
The advantage this approach holds for us is the low volume customers, who presumably have a relatively lower valu¬ation for water consumption, will purchase fewer replacement filters. Conversely, high volume customers, who presumably have a larger consumption rate than single families will pur-chase more cartridges. The result will be making more money on the high valuation consum¬ers, as the price for the pitchers will be reasonably cheap for both the target consumers. It’s a brilliant pric¬ing strategy that captures the value cus¬tomers place on our product. In other words we will be approaching the market with the razor/razor blade model.2
2. Determine and discuss pricing tactics (product line pricing, Value pricing, Differential pricing, or Competing against private brands) to be used for your product.
Since Sono Filter brand name and logo has enormous recognition in the Asian Market our objective will be introducing it as a new manufacture in the United States and to become a brand of choice during consumers purchasing decision.
The private labeling will become a significant component of the water filtration industry and that a plethora of distributors will undertake such initiative. We believe that our private labeling can provide us as a distributor with opportunities to compete against private brands such as Brita, enabling us to sell lower cost products to gain market share and potentially generate significantly higher gross margins. And since we have chosen a penetration pricing strategy low initial price setting is our main objective compared to many competitive
References: 1. Corey, E.R., Cespedes, F.V. and Rangan, V.K. (1989), Going to Market ± Distribution Systems for Industrial Products, Harvard Business School Press, Boston, MA, p. 394. 2 3.. Jackson, D.M. and d’Amico, M.F. (1989), ``Products and markets served by distributors and agents’’, Industrial Marketing Management , Vol 4. Jeff Tanner and Mary Anne Raymond. Principles of Marketing. Publisher: Flat World Knowledge. 2010. P 15.3 5 6. Malhotra, N.K. (1996), Marketing Research: An Applied Orientation, 2nd ed., Prentice-Hall, p