Pricing and Distribution in Marketing Decisions
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Contrast the pricing and distribution strategies of Rolex and Timex.
(1) What is the pricing strategy used by each company? What are the reasons for and/or against a price reduction for this particular product or service?
(2) How is this product distributed, i.e., how do customers and clients find it? How does each product's distribution fit (or fail to fit) its target market, as defined in Module 1?
(3) Why would each product be (or not be) a good candidate for online distribution?
Pricing:
Florissen, Andreas; Maurer, Boris; Schmidt, Bernhard; & and Vahlenkamp, Thomas (2001, August). The race to the bottom: When industries deregulate, their managers face unfamiliar challenges. Price wars are often the unfortunateâ?"and unnecessaryâ?"result. McKinsey Quarterly. McKinsey & Company.
Rafi, Mohammed Ditch the Discounts. Harvard Business Review; Jan/Feb2011, Vol. 89 Issue 1/2, p23-25, 3p, 2 Color Photographs
http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=56696805&site=ehost-live
Bertini, Marco, and Luc Wathieu, How to Stop Customers from Fixating on Price. Harvard Business Review Vol. 88 (May), p. 84-91
The race to the bottom
When established companies launch a price war, they generally believe that prices will eventually rise again. But psychologically and practically, price increases can be much trickier than price cuts. Throw a stubborn attacker into the mix, and incumbents can find themselves trapped in unsustainable price structures. This article from 2001 shows companies how to analyze the four main factors in pricing decisions: competitors' prices, switching rates, the value of customers, and costs to serve. These factors may seem obvious, but the authors' time-tested ideas about them are not.
Available on 2011 March 17 at
http://mkqpreview2.qdweb.net/PDFDownload.aspx?ar=1078
Hill, Dan (2010 November 09). Hill-Pricng-MktProfs.doc. Seven Reasons Why Leading With Price Will Kill Your Advertising, Your Branded Offers"and Your Company, Marketing Profs.
Henricks, Mark (2010 November 19). Price-Cutting Peril: Do You Know What You're Doing" Really? The Debunker. BNet.
Do you think that lowering prices will drive more customers to your business? Do this paper exercise first to make sure you really know what you're doing. How many daily washes at $11.00 for each wash will you need to earn the dollar profit you are earning when you charge $12.50 for each wash?
Available on 2010 November 24 at
http://www.bnet.com/blog/business-myths/price-cutting-peril-do-you-know-what-you-8217re-doing-8212-really/477?promo=857&tag=nl.e857
Distribution
With Its New Music Storage and Player, Can Amazon Deliver in the Cloud?
Published: May 11, 2011 in Knowledge@Wharton
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2768
JoS. A. Bank Clothiers, Inc.; JoS. A. Bank Clothiers Expands Its Internet Channel to Ship Orders to International Customers
Anonymous. Investment Weekly News. Atlanta: May 21, 2011. pg. 698
http://proquest.umi.com/pqdweb?did=2343121531&sid=1&Fmt=3&clientId=29440&RQT=309&VName=PQD
Berk, Christina Cheddar (2011 March 7). Here Comes the Bride, All Dressed by Costco. CNBC
Available on 2011 March 8 at
http://www.cnbc.com/id/41950692
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Introduction:
Pricing and distribution are probably the most important components in the marketing decisions of any product since they are the essence upon which a company is able to generate revenue. The pricing and distribution strategies of a company are mainly determined by the market that the company is targeting. Rolex and Timex though both produce watches they apply very different pricing and distribution strategies in their marketing decisions and target very different markets. The pricing and distribution strategies are the strength upon which any company generates revenue and is able to compete effectively in the ever changing business environment. This paper contrasts the pricing and distribution strategies of Rolex and Timex in their marketing decisions.
Pricing Strategies for Timex and Rolex:
Rolex which is in the luxury industry rather than watch industry uses prestige pricing to promote, enhance and maintain the image of its products, and to limit it only to the high end and affluent clientele both young and old. The company uses a price-quality-value pricing strategy for its products where the customers pay more for better high quality luxurious products. This pricing strategy is mainly based on price skimming strategy where the company uses different pricing phases at different times in order to generate profits. In this strategy the company targets a market segment that is willing to pay premium price for the brand. The pricing strategy is a reflection on the luxury and quality of its watches as well as the brand Rolex. The company analyzes the value of the product and prices it highly to enhance its value. This pricing strategy is in line with the positioning brand as an exclusive luxurious product that gives status to its owner (Florissen, Maurer, Schmidt, & Vahlenkamp, 2001; Baker, 2010).
On the other hand, Timex which is in the Watch industry uses a penetration pricing strategy where the objective of the pricing is to maximize sales volume by means of lower prices. The company applies this strategy since the demand for its watches is highly elastic where the customers are price sensitive and any increases in the price of the product would result to reduced sales since customers would simply switch to more affordable rival watches (Florissen, Maurer, Schmidt, & Vahlenkamp, 2001; Baker, 2010).
Reasons for / or against a price reduction in either Rolex or Timex:
Discounts and price cuts have no role to play in Rolex's company strategy. Discounting or price cutting would erode the value of the Rolex's ...
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