PRICING AND DISTRIBUTION IN MARKETING DECISIONS (SLP)

 

 

Pricing and Distribution in Marketing Decisions (SLP)

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Pricing and Distribution in Marketing Decisions

Introduction

Southwest Airlines is one of the biggest airline companies in the United States and is located in Texas. It is well known for its organized operations, competent services and marketing within the airline industry. The airline uses various pricing strategies to ensure that it remains one of the most profitable airlines in the US.

Pricing Strategies

One of the pricing strategies Southwest Airlines uses to maintain its success is known as the value-based pricing, where it offers prices for goods and services based on how the customer values the product rather than considering the cost of production. The company provides products and services that are highly efficient in order to maintain their low prices (Henricks, 2010).

Another type of pricing strategy used by Southwest Airlines is known as penetration pricing, where prices of goods are set lower than the value it gives the customer. This strategy is practiced in order to get a large percentage of customers.  (Bertini & Wathieu, 2011) Another strategy is known as efficiency pricing where prices are set to target customers who are economically minded. For example, the airline company cuts the costs of its services by traveling shorter distances and using more direct routes to land in airports that are less expensive (Hill, 2010).

Effect of Pricing Strategies

            The value based approach pricing is a strategy that will continue to motivate customers to buy from the company because they will trust in the value of products and services offered without any hesitation. This is because of the price strategy focuses on the product’s value to the customers rather than its cost. The customers will also want to stick around because the pricing strategy helps them save time in finding the right product at the right price. In the case of efficiency pricing, the customers’ motivation would be having the ability to save costs on expenses and still receive efficient products and services that are of high value.

For example, because of using this strategy, Southwest Airlines leads in the price market of the airline industry while other similar companies drag behind because they require customers to pay extra charges including ticket and luggage fees (Hill, 2010). In penetration pricing, customers who go for low prices are motivated as it offers goods that are of high value and sold at low prices. The role of discounts to the company is to differentiate it from other companies and sustain its pace of earning high profits.

Role of Discounts

            Discounts give Southwest Airlines’ customers power, meaning that it creates a strong relationship of trust and loyalty between the company and clients. Consumers find it hard to leave and find services in other airlines, enabling the company sustain its large share of customers. If discounting would not be appropriate, the business would use the bargaining option, where they would give people an opportunity to fly on their own terms by allowing them to agree on a price that was lower than the actual. (Rafi, 2011) Other methods include advertising, which informs clients in creative ways of its mission, which is that of allowing many people to afford traveling to any destination.

Distribution Strategy

            Southwest Airlines uses distribution strategies that reduce aspects that lead to competition from the airline industry, and have come up with additional ideas able to replace alternative forms of transport such as the vehicle. For example, the company offers exceptional services for clients who are traveling, and gains value from their low cost representation of reception of many clients and maintenance of low prices.

Conclusion

            When looking at big companies in the airline industry, it is easy to assume quality services are offered depending on ranking of the price. It is believed that the higher the price, the higher the quality of goods and services offered because of the cost of production involved. However, Southwest airlines, takes an opposite turn to that formula and focuses more on customer importance by providing goods and services that are of highly value and efficiency at an affordable cost.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

Bertini, M. & Wathieu, L. (2010). How to Stop Customers from Fixating on Price. Harvard Business Review, 88: 84-91.

Henricks, M. (2010). Price-Cutting Peril: Do You Know What You’re Doing — Really? The Debunker. BNet. Web.

Hill, D. (2010). Seven Reasons Why Leading With Price Will Kill Your Advertising, Your Branded Offers—and Your Company, Marketing Profs. Hill-Pricng-MktProfs.doc. Web.

Rafi, M. (2011). Ditch the Discounts. Harvard Business Review, 89, 1/2: 23-25.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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