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4.1. Product Mix strategy. The products or services of an organization help to create the image of the firm in the mind of the customer. This image is reflected in the customers’ perceptions and feelings about its products or services. It is important, since experience with only one of a firm’s products or services can affect a person’s attitude to the firm’s other products or services. This can apply even if the customer has never used the other products. Products are more than tangible objects and services are more than a visible activity. People purchase products and services to satisfy needs or wants and obtain benefits as a result. Organizations have to understand the nature of the needs and wants in order to appreciate the kind of benefits people expect to obtain. Among the different kinds of benefits that people can obtain from buying goods and services are: good value for money, ease of use, novelty, safety, availability, economy in use, good design. All this items are related with the value equation developed individually (so subjectively) by the consumer. Benefits enter into the equation when a customer decides to buy one product in preference to another. Similarly, when marketing a product or a service an organization should give attention to the benefits it creates for the user. It is the benefits which make a product or service attractive to a customer. Organizations have to communicate these benefits to the user, directly or indirectly, in order to persuade the latter to make a purchase. The capability of a product or service to produce the kinds of benefits desired by the user is exhibited in various characteristics of the product or service.‘Product decisions’ have to be made with respect to these various attributes offered by the company just following positioning rules, benefits given to the consumer and brand loyalty (referring to image-identity balance). 4.2. Price-positioning strategy. There are market conditions under which organizations can exert some control over the level at which price is set.
If an organization cannot exert any control over the setting of pricing then it has to accept whatever the market determines will be the price.Perfectly competitive markets specify that there is a homogeneous product, complete information among buyers, rational buyer behavior and large numbers of producers. In a perfectly competitive market, a producer has almost no control over prices. They are determined by market forces brought about by competitive pressures and patterns of consumer expenditure. There are extremely few such markets in reality. Most markets are imperfect and some control over the setting of prices is possible. Price squeeze: discriminatory prices may sometimes be charged by a firm which vertically integrated for the supply of inputs to non-integrated rivals, in order to put the latter at a competitive disadvantage. This can occur when the integrated firm produces both the input and the finished product, while its customer produces only the finished product, and is dependent on the integrated firm for supplies of the materials, sub-assemblies or parts. A ‘squeeze’ occurs where the integrated firm charges the non-integrated firm a high price for the input but sells its own finished product at a low price. This allows the non-integrated firm only minimal profits or even forces it to make a loss. It is common to occur for instance when a company has a fix-direct cost and need to spread it to potential consumers: in that case, company can offer same service high price and adjusting in front of demand reactions of targeted consumers. (e.g. Vueling, a role-play theatre, etc.). Penetration versus skimming pricing strategies: Penetration and skimming policies are most often encountered when dealing with new products but they are sometimes used in other situations. Penetration strategy: when introducing a new product, the objective may be to achieve early market penetration. The strategy may amount to setting a comparatively low price to instigate market growth and capture a large share of it. The effect of the experience curve will cause long-run profitability to rise as a result of gaining a large market share or a growth in market share. A penetration strategy may be appropriate if the market seems to be highly price sensitive, or if a product is favored by economies of scale in production or, where a low price discourages actual and potential competition. Skimming strategy: A skimming strategy contrasts with a penetration strategy and is used to take advantage of the fact that some buyers are prepared to pay a much higher price because they want the product very much. Firms adopting this strategy may initially set a high price to gain a premium from such buyers and may only reduce it progressively to bring in the more price-elastic segments. This strategy is appropriate where there exists a substantially large number of buyers whose demand is relatively inelastic. It may also be used where the unit production and distribution costs associated with producing a smaller volume are not so much higher that they cancel out the advantage of charging what some of the market will buy, or where little danger exists that a high price will stimulate the emergence of competition.Competition-oriented pricing: First to consider is the moment (or step) where the market or industry in its life cycle is and the company position on it. It will affect directly on what is called “price architecture” and may loss control in front of competitors or distributors decisions. In this case, a firm makes sure that the prices it sets are in keeping with those charged by competitors and it is often referred to as the going-rate price. This kind of pricing is used often in homogeneous product markets where the market structure ranges from pure competition to pure oligopoly. In a purely competitive market, the firm exercises little choice in setting its price. In the case of pure oligopoly it has more choice, firms can charge the same price as competitors. In view of the fact that there are only a few firms, each one of them knows the other’s price, and buyers are also well abreast of prices.