How a company prices its products and gets them to the customer is a crucial element of success in business. With the rise of e-commerce and other online retail channels, companies need to carefully consider their pricing and distribution strategies. In this article, we’ll explore some examples of distribution-based pricing and see how they work.
🔝 Top 10 Pricing and Distribution Strategy Examples
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đź’¸ Distribution Pricing Definition
Distribution pricing refers to the process of setting prices for products or services sold through distributors. Typically, this involves setting a designated percentage of discounts that are excluded from the retail price. This approach ensures that the distributor can profit from the sales while the business owner can expand their reach and increase revenue.
Why Is Pricing and Distribution Strategy Important?
Pricing and distribution strategy is important for businesses because it directly affects the success of their product in the market:
- A well-planned pricing strategy helps determine a product’s cost, which can influence consumer behavior.
- A distribution strategy determines how and where a product is sold, impacting its accessibility to consumers and sales volume.
The proper pricing and distribution strategy can help businesses increase their profits, gain a competitive edge, and build a strong brand reputation.
🤔 Pricing and Distribution Strategies: How to Determine
When determining pricing and distribution strategies, business owners should keep the following points in mind:
đź‘” Pricing and Distribution Strategy: Examples of Types
Competitive Pricing
A competitive pricing distribution strategy is a method that involves determining the prices of products or services in correlation to the costs of the competition. Distributors often set similar pricing to the one mentioned in the manufacturer’s price list. It’s one of the most common methods, sometimes called a “manufacturer-aligned pricing strategy”.
Cost-Plus Pricing
Cost-plus pricing has another name, “markup pricing”. It’s a business plan where a fixed amount or percentage is added on top of the existing distribution costs, determining the sale prices of products.
Economy Pricing
The economy pricing strategy sets the prices extremely low to make a minimal profit on each product. The idea is to sell as many units of products as possible. This kind of pricing strategy is often known as a “volume-based” strategy.
Penetration Pricing
Small businesses or start-ups mostly use penetration pricing. They want to gain a considerable market share quickly, so they set low introductory prices to attract new customers. Established and large brands with good in-marketing techniques use this strategy when they want to launch new products in the market.
Value-Based Pricing
Value-based pricing strategy involves setting the prices based on the consumer’s perception of the product. It is also often called “customer’s willingness to pay” because this strategy revolves around the customer’s priorities and what they expect to pay. It makes it possible to determine the estimated sales channel easily.
Other companies with excellent pricing and distribution strategies include:
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