The GelBar must be priced to take advantage of the multiple markets to which the product might appeal. This means that multiple pricing strategies must be employed over the course of the product's life cycle. Additionally, impacting the margins the product is able to command is the distribution channels used to get the product to market. In looking at the distribution channels, the pros and cons must be analyzed and potential new solutions, including direct to consumer, that allow increased margins and disintermediation must be examined. Lastly, the top two promotional elements, advertising and sales promotion, for the GelBar allow it to reach the mass market while not adding the overhead cost of mass customization which is unnecessary given the product type.
Leveraging the effect of multiple pricing strategies across the product life cycle to capture margin
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Due to the introductory nature of the product and the elite athlete segment that the product is marketed towards, the ideal pricing structure to begin with is a skimming structure with promotional activities that market the product at athletic events. The premium pricing structure of GelBar will allow Powerbar to capture the most margin possible and get an idea for the final price point for the product. This skimming strategy will immediately associate the bar with elite performance and will put the bar into the price range of high income athletes. This naturally leads to future promotional possibilities with celebrity and professional athletes. Further, product line expansions exist for an elite version of GelBar - a higher priced, higher margin bar with essentially the same ingredients.
Once competitors enter the market, a penetration strategy can be used for the non-elite version of the bar. By utilizing a diverse product line with differentiation between elite and normal, GelBar can use both a skimming strategy and a penetration strategy, internally accounting for the high margin from the elite version to offset the lower margin or below cost pricing strategy used in the penetration strategy for the normal bar. Obviously, the distribution channels utilized by GelBar are impacted by the product type and the amount of mass marketing that Powerbar wishes to use.
Building a winning distribution channel mix to move GelBar into the mass consumer market
Given the two versions of GelBar that will be marketed, we can assume that the two distribution channels will be slightly different. The elite GelBar version will be highly specialized distribution. The manufacturer should sell directly to elite athlete stores, such as REI and Erik's Bikes locally in Minnesota. By moving the GelBar directly to athlete stores, the margins can be increased more outside of just a premium price point. However, this lean distribution channel means that there will be an increased fixed cost for the trucks to move the product. There is the possibility of using a third-party logistics service to transport the product, but this would mean the addition of a distributer to the distribution channel and less margins.
Below is a chart outlining the pros and cons of the current distribution channel by each distribution channel component. Two distribution channels are explored - the elite GelBar distribution channel that caters to elite athletic outlets and the normal GelBar distribution channel that caters to mass consumers. The mass consumer distribution channel can deal with more retail outlets via the wholesaler, but also loses touch with consumers via slower feedback times. This can be solved by soliciting consumer feedback via rich media advertising on the Internet. The next change that can be made is to use a corporate vertical marketing system, such as using PowerBar's current distribution channel for the new brand or use its distribution network for GelBar.
Ideal promotional objectives for GelBar utilizing promotional elements
The top two promotional elements for GelBar are advertising and sales promotion, both able to inform the masses about GelBar early on in its life cycle. The other promotional element that GelBar could use is public relations, but this is better suited for a corporation than a single brand within a larger label such as PowerBar. The advertising element would be used for media such as television, targeted magazines and hosting or sponsoring athletic events that would attract the target consumer for the GelBar. The high control of advertising - and more specifically pioneering advertising, allowing the company to decide when, to whom, and what the message is transmitted, makes this ideal for a new product, especially one that would include some element of educating the consumer about the new product's benefits.
Sales promotion is the other crucial element of the promotional mix. By utilizing consumer-oriented sales promotions, GelBar can develop consumer awareness and increase the sales per person within its target market. The mass targeting of this element makes it ideal for both the normal and elite versions of the bar as the consumer can interact how he or she chooses with similar cost to PowerBar. It is possible for GelBar to be priced at a deal, especially when introducing the new normal version of the bar. This would be coupled with permanent penetration pricing to capture more of the market. Coupons could be bundled with other athletic goods such as water bottles for cross-promotional selling. Samples are a key component of the promotional mix early in the product's life cycle. By giving away samples of the bar at athletic events, GelBar can build a consumer base that views the brand positively and has a minimized prospector theory as there is minimal downside to taking something that is free.
Those elements that should not be included are customized in focus. While it is important to establish an individual relationship between the consumer and the brand, early on in the product life cycle this takes a back seat to informing the consumer what the product can do and the problems it solves. Personal selling and direct marketing are two elements that have reduced marginal benefit compared to advertising or sales promotion. The decreased reach of these elements leads to fewer gross rating points. However, some portions of these elements can be utilized for little cost. Personal selling may take place at the promotional events at athletic venues. The database management of direct marketing can have a reduced cost if wrapped into the same program as the customer feedback initiative via rich media.
The pricing strategy, distribution channel construction, and promotional mix all play into each other for the GelBar to be successful. The reach of the advertising makes penetration pricing possible for the normal version of GelBar while the high margins in the elite GelBar make it possible to use a more direct distribution network. By combining the elements properly, GelBar is poised to dominate the new market and gain an significant advantage over competitors when new bars are introduced into the same space.
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