Question

To maintain its competitive stance, your company will embark on an innovative product development initiative in the coming year. This innovation will remain within the present family of products (no product diversification planned).

a) In preparation you have been tasked to explore the various pricing strategies that should be considered. Discuss two pricing strategies you would consider for new product market entry. Be sure to include value pricing as one of your strategies.

b) You have been informed that you will also be tasked with developing your promotions for your innovative product launch. Which of the promotional mix elements will you include and why? Identify no more than three elements. What will your clear, consistent, and compelling message be for your innovation?

c) Identify a budget you are likely to be given for your promotional campaigns. How will you allocate your total budget amongst the three elements? Clearly explain the allocation.

d) How will your intended target segment purchase your innovative product? Where or how can they shop for it? Briefly explain.

Describe your target segment. Your discussion should include information on their demographics, lifestyles, purchasing power, buying patterns, etc.

Answer 1

a) Final Answer:

For the new product market entry, I would consider adopting both Penetration Pricing and Value Pricing. Penetration Pricing will help us gain quick market share by offering the innovative product at a lower initial price, attracting a large customer base. Simultaneously, Value Pricing will focus on highlighting the unique value propositions of our product, allowing us to command a premium based on the perceived value it brings to customers.

b) Final Answer:

For the promotional mix, I would include Advertising, Public Relations, and Social Media Marketing. Advertising will create awareness, Public Relations will build credibility through media coverage, and Social Media Marketing will engage our target audience. The clear, consistent, and compelling message will emphasize the innovation's benefits, solving a specific problem or enhancing customers' lives.

c) Final Answer:

The promotional budget is likely to be 10% of the total budget. I would allocate 40% to Advertising, 30% to Public Relations, and 30% to Social Media Marketing. This distribution ensures a balanced approach, leveraging traditional and digital channels for optimal reach and impact.

d) Final Answer:

The innovative product will be available both online and in select retail stores catering to our target segment. The target segment comprises tech-savvy individuals aged 25-40, with a focus on urban professionals. They have a higher purchasing power, follow modern lifestyles, and prefer online shopping but still appreciate the in-store experience for certain products.

Step-by-step explanation:

a) Pricing Strategies:

Penetration Pricing involves setting a low initial price to quickly penetrate the market. This helps in gaining early adopters and establishing a strong market presence. Value Pricing focuses on emphasizing the unique value propositions of the product, allowing the company to charge a premium. Combining both strategies ensures a balanced approach, attracting price-sensitive customers while also capturing value-conscious segments.

b) Promotional Mix:

Advertising creates broad awareness, Public Relations builds trust and credibility through media coverage, and Social Media Marketing engages the audience directly. The chosen mix ensures a comprehensive promotional strategy, utilizing various channels to reach different segments of the target audience. The clear, consistent, and compelling message focuses on the product's benefits, ensuring a memorable and persuasive communication.

c) Budget Allocation:

Allocating 40% to Advertising ensures a robust outreach, while dedicating 30% each to Public Relations and Social Media Marketing balances traditional and modern promotional channels. This distribution optimizes the impact of the promotional campaign, considering the diverse preferences and media consumption habits of the target audience.

d) Target Segment and Purchase Channels:

The target segment, aged 25-40, prefers online shopping but values in-store experiences. Making the product available both online and in select retail stores caters to their preferences. Understanding the demographic and lifestyle factors ensures a strategic approach to product availability and shopping channels, maximizing accessibility for the target audience.