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Submit your analyses of the next two P's (place and price) for your


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Place and Price Analysis

Submit your analyses of the next two P's (place and price) for your Apple's iPhones product/services. Your place analysis should discuss distribution channels (how are they getting their product to market?) It should also look at where the product is being sold and the approach to inventory.

Your price analysis should describe the pricing system in place. Is it cost-based, value-based, or competition-based, and how did you come to that determination? Include an evaluation of the pricing strategy in your analysis.

I have attached a copy of an example of how the assignment should be done. Please use APA format in-text citation and reference page.


Running Head: PLACE AND PRICE ANALYSIS Place and Price Analysis

 

Fundamentals of Marketing and Sales

 

BUS3030 1 Running Head: PLACE AND PRICE ANALYSIS 2 PLACE Distribution Channels

 

Old Spice products are convenience products in that they are relatively inexpensive items

 

that merit little shopping effort. As such they require the use of an intensive distribution model in

 

order to ensure that sufficient quantities of the product are available to consumers wherever they

 

may wish to buy them. (Lamb, Hair, & McDaniel, 2013). Old Spice products are currently

 

available in department stores, supermarkets, drugstores, convenience stores, discount stores, and

 

warehouse club stores. In addition, Old Spice products are also sold through an extensive

 

channel of online retailers including the Proctor & Gamble (P&G) eStore at www. Pgestore.com,

 

online stores such as Amazon.com, as well as the online properties of stores like Target, Kmart,

 

Walmart, CVS, etc.

 

Old Spice relies on a Multiple Distribution model which utilizes two or more channels to

 

distribute the same product to target markets (Lamb, Hair, & McDaniel, 2013). Old Spice relies

 

primarily on the retail channel and the wholesaler channel. The retail channel distributes

 

products through large retailers such as Walmart, Kmart, Target, Rite Aid and others, while the

 

wholesale channel distributes to larger ?big box? wholesalers such as Costco Wholesale. The

 

distribution chain includes several large manufacturing and distribution centers located across the

 

United States as well as throughout the world.

 

The internet plays a significant role in Old Spice?s distribution, although it primarily

 

functions as a secondary distribution channel and products are not really sold directly from

 

P&G/Old Spice to consumers. Old Spice is a marketing champion in social media, with the ad Running Head: PLACE AND PRICE ANALYSIS 3 campaigns using Isaiah Mustafa, who portrays the ideal man, contributing to increased consumer

 

interest in the brand/products, which in turn drives purchases in stores. These funny and witty

 

videos and commercials are widely available on YouTube.com and Oldspice.com.

 

Placement Strategy

 

P&G measures consumer satisfaction using what it calls the ?moment of truth.? The

 

moment of truth occurs when the consumer reaches the shelf and finds that the desired product

 

is, or is not, available. This is a critical moment, because if the product is not immediately

 

available, the consumer usually moves on to buy a rival product (Gartner, Inc., 2002). Research

 

conducted in 2000 told P&G that in 55% of cases (75% for promotional items), consumers were

 

not satisfied when they looked on the shelf for the products they wanted. This prompted P&G

 

management to dramatically improve their distribution with the creation of a consumer-driven

 

supply network, which is more responsive to end-user demands.

 

The end result is that P&G/Old Spice products are available just about everywhere, just

 

about any time. Because of the convenience nature of the Old Spice products, it is critical that

 

they be where consumers are most likely to find them. As a health and beauty item as well, the

 

target market for Old Spice products is necessarily much broader than for a specialty items.

 

Consumers of all income segments and across all demographics will purchase these types of

 

products.

 

Careful consideration has gone into determining the locations where Old Spice products

 

are sold, and to ensure that they are widely available and easily purchased. Old Spice products

 

are sold to retailers who generally have a large footprint, or presence, in a given population

 

center. In addition, selected wholesalers are chosen to ensure that Old Spice products are Running Head: PLACE AND PRICE ANALYSIS 4 available to additional smaller convenience or ?mom & pop? stores and markets. By using this

 

placement strategy, P&G/Old Spice is able to guarantee that large amounts of its products are

 

available in larger retail stores where large numbers of people shop, and in other locations where

 

decreasing numbers of people shop in sufficient quantities to meet the consumer demand.

 

The placement of Old Spice products in ?big box? warehouse or club locations is usually

 

limited to a single popular line of a standard product. Costco Warehouse, as an example is

 

currently stocking only the Old Spice ?High Endurance Pure Sport? body wash, and ?Swagger?

 

deodorant, and for a limited time only. Club or warehouse stores typically take this approach

 

when introducing a new brand in order to test the appeal and popularity among members.

 

Consumers who purchase Old Spice products from club or warehouse stores are usually those

 

who are cost-conscious shoppers looking for the best deal on the product, and will take

 

advantage of the club store?s ability to offer the lowest prices. The fact that the customer much

 

purchase large quantities or ?packs? of these products is not an issue, which indicates that the

 

Old Spice brand is either the preferred brand of the consumer, or that the consumer is willing to

 

change brands in order to enjoy the price advantage over their usual brand. This is also a benefit

 

for Old Spice in that they are able to sell large amounts of product per transaction by comparison

 

with other places of purchase.

 

Old Spice?s strategy for product placement in other large retailers is primarily centered on

 

offering a broad range of line extenders. Old Spice deodorant is available in 12 different subbrands, in gel, stick and spray, and across 7 different product scents. This approach generally

 

guarantees that the retailer will attempt to stock the entire product line in order to appeal to the

 

broadest range of consumer tastes. In turn, Old Spice product reps work hand in hand with

 

retailers to ensure that adequate shelf space is available for the product line. Running Head: PLACE AND PRICE ANALYSIS 5 PRICING

 

Pricing Strategy

 

The pricing strategy for Old Spice products is somewhat complicated due to the product

 

distribution strategies outlined above. P&G has a pricing strategy for sales to its primary

 

customers, the retailers, and in turn the retailers employ a different pricing strategy for their sales

 

of Old Spice products to end users. P&G had previously relied on Sales-Oriented Pricing

 

Objectives based on market share, which is a company?s product sales as a percentage of total

 

sales for that industry. (Lamb, Hair, & McDaniel, 2013). Conventional wisdom has usually held

 

that a higher market share usually results in higher revenue, however, this is not always the case.

 

P&G switched from market share to ROI (return on investment) objectives after they realized

 

that profits don?t always follow from a large market share. (Lamb, Hair, & McDaniel, 2013).

 

ROI-based pricing strategies are part of the Profit-Oriented Pricing Objective which also

 

includes profit maximization and satisfactory profits. ROI measures a company?s overall

 

effectiveness in generating profits with the available assets?the higher the firm?s ROI, the better

 

off the firm is. By knowing the costs of assets associated with Old Spice products, such as the

 

equipment required to manufacture them, R&D, raw materials, logistics, etc., Old Spice product

 

management can then determine a target ROI that will ensure profitability, and from there

 

determine a pricing structure that ensures they meet or exceed the ROI target. By selling

 

primarily to large retailers Old Spice is able to better manage their ROI and predict profitability,

 

because pricing is relatively stable across a broad spectrum of their primary customer base. Huge

 

volumes of product shipped to a given retailer would be priced somewhat lower than somewhat Running Head: PLACE AND PRICE ANALYSIS 6 smaller quantities shipped to a medium-sized retailer, and so on. Cost savings related to

 

improving asset costs would make profits higher, and allow for flexibility when pricing against

 

the competition.

 

Retailers of Old Spice products usually take a somewhat different approach to

 

determining a pricing objective for sales to consumers. They tend to adopt a Status Quo Pricing

 

Objective which essentially seeks to maintain existing prices or to meet the competitor?s prices.

 

(Lamb, Hair, & McDaniel, 2013). This is common practice with convenience goods such as

 

health and beauty products, where there is increased competition and a large number of

 

consumer product choices. As well, consumers of these products base their relative value on the

 

perceived satisfaction they receive from using the product, and are primarily interested in

 

obtaining a reasonable price at the time of the transaction.

 

In general, retailers of Old Spice products, in tandem with P&G, rely on a penetration

 

pricing model for their pricing strategy, which means charging a relatively low price for a

 

product as a way to reach the mass market. (Lamb, Hair, & McDaniel, 2013). By capturing a

 

large share of the substantial market for these types of products, P&G is able to lower production

 

costs which in turn means a higher ROI.

 

Pricing Comparison

 

Old Spice deodorants are competitively priced in comparison to the competition. A

 

cursory comparison of prices for Old Spice Classic Deodorant Stick Original Scent, the 3.25 oz.

 

size, revealed a price of $3.79 at a local CVS Pharmacy, and a price of $2.79 at a local Kmart.

 

By comparison, the similarly sized Axe Deodorant Stick Phoenix Scent was priced at $5.29 at

 

CVS, and $4.29 at Kmart. Old Spice products are typically priced lower than similar competitor Running Head: PLACE AND PRICE ANALYSIS 7 products, primarily due to the economies of scale P&G enjoys as a result of their size. This

 

results in lower asset costs for Old Spice products in comparison to the competition, which

 

allows P&G to price it lower than the competition and still make a profit in line with their ROI

 

targets. There is an obvious difference in pricing from one retailer to the other as well, again,

 

primarily related to the relative size of the retailer and their resultant buying power with P&G. A

 

larger retailer can buy in larger quantities and can price lower due to increased volume than a

 

smaller retailer.

 

Pricing Analysis

 

I believe that the pricing system for Old Spice products is cost-based from the

 

manufacturer to the retailer, primarily based on the ROI pricing strategy P&G employs when

 

selling to its primary customers, the larger retailers. From that point the retailers tend to rely on a

 

status quo, or competition-based pricing strategy, with slight differences based on the relative

 

mark-up potential of each retailer as a result of their size and purchasing power.

 

Consumers expect to get a premium quality product in terms of performance and scent

 

with Old Spice. The higher performing lines of Old Spice have prices of $3.00 to $4.00 per

 

container, which supports the brand offering of high performance at a moderate price point. P&G

 

has invested heavily in advertising to promote the brand, which provides additional recognition

 

that supports its pricing strategy. The competitive products in the store and online are comparable

 

in price with basic products on the low end of the price scale. (Old Spice Market Overview, n.d.)

 

Products with various scent and performance options, including sprays, are on the higher end of

 

the price scale. Old Spice?s product offerings cover the range of prices, which allows each line to

 

serve different demands in the segment. Despite the various offerings, Old Spice is focused on its

 

High Endurance and Red Zone lines, which offer higher performance and more scent options. Running Head: PLACE AND PRICE ANALYSIS

 

The moderate price point and promotion of these lines support why Old Spice is the segment

 

leader in the men?s deodorant segment. 8 Running Head: PLACE AND PRICE ANALYSIS 9 References

 

Gartner, Inc. (2002). Procter & gamble: Building a smarter supply chain. Gartner, Inc. Case

 

Study, Retrieved from http://www.emory.edu/BUSINESS/dra/PGsmartersupplychain.pdf

 

Lamb, C., Hair, J., & McDaniel, C. (2013). Mktg 7. Mason, OH: South-Western.

 

Old Spice Market Overview. (n.d.). pawade0484 on HubPages. Retrieved August 11, 2013, from

 

http://pawade0484.hubpages.com/hub/Old-Spice-Market-Overview

 


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