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    The hot potatoe Pricing Strategy and Channel distribution

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    Pricing strategy and Channel Distribution.

    1. Determine and discuss a pricing strategy (Penetration or Skimming).

    2. Determine and discuss pricing tactics (Product line pricing, Value pricing, Differential pricing, or Competing against private brands) to be used for your product.

    3. Identify any legal and ethical issues related to the pricing tactics.

    4. Prepare a marketing distribution channel analysis identifying the wholesaler, distributor, and retailer relationships.

    5. Discuss how the distribution strategy fits the product/service, target market, and overall marketing objectives for the company.

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    Pricing Strategy
    Penetration or Skimming Strategy
    The pricing strategy for Hot Potatoe products should be based on demand, as well as on costs.
    We have determined that the value to the consumer is in offering a healthier fast food option that
    meets dietary guidelines and satisfies the consumer's needs for convenience and satiety. Perceived
    value to the consumer, competitor pricing and costs are all factors that should determine price
    (California Institute of Technology, 2008). As a new entrant into the fast food market, Hot Potatoe is
    introducing an entirely new food concept. Consumers will be hesitant to switch, so penetration pricing
    that encourages them to do so is a suitable approach. However, competitors may react by offering a
    similar product at the same or lower price. Fast food chains that already have a large market share in
    the fast food industry may be able to offer replacement products at an even lower price, relying on
    existing supply chains and customer loyalty to choose their products over those of Hot Potatoe.
    Therefore, pricing should take and intermediate approach, that falls somewhere between
    penetration and skimming strategy. While skimming is commonly used in introducing new and
    innovative products, penetration pricing is used to gain market share. The offerings of hot baked
    potatoes with healthy toppings that make it more like a satisfying meal should not be considered snack
    or value items. If a strictly penetration pricing strategy is used, consumers may perceive Hot Potatoe as
    merely offering snack items. Panera bread, which is categorized somewhere between a fast food
    establishment and a casual dining place, has been able to maintain market share through tough
    economic times, by maintaining its price structure, while offerings new products and improving quality
    of its products (Kraus, 2009). Hot Potatoe does not have an existing customer base, but does have a
    product with the potential to gain market share, through differentiation, much like Panera Bread.
    Pricing Tactics
    Pricing tactics should consider how Hot Potatoe may need to react in the future, as well as how
    it should approach pricing during the introductory phase. Because the intermediate strategy falls
    somewhere between penetration and skimming, there is some allowance for lowering prices, in the
    event that competitors may offer a similar product at a lower price. If the focus on Hot Potatoe
    products is on differentiation, however, low price is not likely to generate additional interest. The
    way a product is priced does have an influence on consumer perceptions. Many organizations use
    $1.99, $4.99 or $9.99, as a means of offering consumers a perceived discount. On the other hand,
    products prices designed to signify a higher quality often end in '0' (Toolika, 2010). Therefore, Hot
    Potatoe products will be priced at $3.50, $4.00 and $4.50. They are comparable to an entire value meal
    at a fast food chain, but imply a higher quality food choice. Hot Potatoe ...

    Solution Summary

    The expert examines the hot potatoes pricing strategy and channel distributions.