The need for a proper pricing strategy

Pricing strategy

The need for a proper pricing strategy is reinforced in the available literature, and according to the researchers, a poor pricing strategy could lead to bankruptcy. The importance of the pricing strategy is recognised by Kerin (2012) who argues that pricing can help an organisation to attain the necessary competitive advantage. But what differentiates a proper pricing strategy from a poor one? In Kotler and Philip’s (2005) view, a proper pricing strategy should consider the external and internal environments, and should be affordable to the customer. In respect to mobile telecommunication industry, customers are very sensitive to price differences, and so the operators are forced to come up with affordable prices as well as adopt the ‘price bundling’ concept. Product bundling as Kotler and Keller (2012) suggest could be beneficial to organisations operating in competitive markets, and whose objective it to expand their market share. Companies in the telecommunication industry have also adopted the discount pricing strategy which helps them to sell a huge quantity of products especially in the developing markets.

Appropriate distribution channels allow companies to deliver goods to customers within limited time. In the mobile telecommunication industry, one of the common channel strategy used is direct marketing in order to increase the profit margins. Customers are able to access phones and other accessories from retails stores. Ziethmal (2000) recognises the need of incorporating direct customer interface in the firm’s value chain. The one-stop-shops allow the mobile operators including Vodafone to integrate the pre-seal, sales, and post-sales activities. In addition, the one-stop-shores allow the customers to access a variety of service including consultations, product presentation, contract arrangements and product delivery (Proctor, 2000).

The mobile service sector relies on heavily on relationship marketing to popularise their products and services. As competition becomes stiff, firms are being forced to keep loyal customers in order to improve the long-term profitability of the company. The concept according to McDonald (2001) evolved from direct response marketing and emphasises on long-term relationships. The concept replaces the traditional marketing framework, and extends communication beyond intrusive advertising and sale promotional messages. Unlike the traditional marketing framework, this new concept emphasises on customer retention, customer contact, customer value, and customer. In regard to the mobile telecommunications sector, relationship with the customers can be improved by providing them with quality services. The quality of services can be improved by increasing reliability and the capacity of the firms to handle customers’ concerns. Lovelock (2001) observes that other key determinants of quality service include the rate of responsiveness and the degree of empathy accorded to the customer. According to the available literature, good perceived service quality should have the following elements; accessibility and flexibility, service scope, service recovery, reputation and credibility (Vargo and Lusch, 2004).

The importance of the relationship marketing in the UK mobile phone sector is highly recognised and already companies like O2 and T-mobile have committed themselves to developing long-term relationship. It is assumed that developing enterprise-level systems could help firms to acquire real-time information for the improvement of customer services (Vargo and Lusch, 2004). In addition, such information provides telecom companies to interact with customers on a regular basis and helping the marketer to identify and prospect new leads (Moller and Halinen, 2000). Although mobile service providers are already using relationship marketing to achieve customer loyalty Dev, and Don (2005) believe they could do more by integrating their systems with call centre operations. Such a strategy will help the firms to collect consumer-related data and use it to meet their needs and wants. The information obtained could also be used to identify consumers’ demographics and their buying pattern and providing personalised services to different consumer segments (Sudhir, 2001).

The marketing communication strategy should involve differentiation of products and services. In the modern economy differentiation of products and services can be achieved trough branding. The available literature has also recognised the role of branding in the achievement of competitive advantage and giving the company a sustainable position in the industry (Erdem and Baohong, 2002). A brand as Aaker and Joachimsthaler (2000) observe should guarantee customers particular features, benefits and services, and ensure there is consistency. A key component as discussed by Aaker and Joachimsthaler (2000) is brand management which entails managing products and services from the time they are introduced in the marketplace until when they are removed. In the telecommunication industry, firms use all manner of strategies including advertising intangible assets such as quality, shape, colour, and lifestyle compatibility (Cellini and Luca, 2003).

A key component of branding is brand equity which is defined as a set of assets and liabilities which are linked to particular product or a service (Jobber, 2001). According to Capon and Hulbert (2000) branding equity influences consumer’s choice of a particular product over another and the willingness of a customer to pay relative more for a product or service. Branding equity provides value to companies by enhancing the value of their marketing programs, and by enhancing the following components: brand extensions, trade leverage, prices, and competitive advantage. On the other hand, brand equity provides value to the customers by enhancing confidence in purchase decision, improving satisfaction and increasing the speed at which information is interpreted and processed (Lawrence et al., 2000). In this regard, due to its high brand equity, Vodafone has more trade leverage when bargaining with mobile manufacturers, distributors and retails. Secondly, the company can be able to charge higher prices for its products and services compared to its competitors. Thirdly, the company has been able to establish brand extensions and its brand has high perceived quality.

As Blythe (2001) suggests brand equity is closely related to the following concepts: brand loyalty, name awareness, perceived quality, brand association and proprietary assets. As Blythe (2001) further observes brand loyalty is associated with the following constructs: switching costs, satisfaction, liking and commitment. Brand loyalty is very vital in the mobile sector, as it for this reason that firms always strive to ensure the consumers become committed to their products and services (Brassington and Pettitt, 2000). The available literature concurs that when well managed; brand loyalty can lead to positive outcomes such as reduced marketing costs, improved trade leverage and brand awareness (Lewis and Bridger, 2000).

Firms should always strive to create product of perceive high quality in order to attract new customers and gain the necessary competitive advantage, the concept, is defined as the perceived superiority of a product or service relative to other alternatives (Patterson, and Ward, 2000). In the mobile service sector, the perceived quality of products is very vital as it increases the switching costs and reduces the customer churn rate. It also gives customers a base on which they can make the purchase decision and differentiates the products from other competing goods. Of-course, as Ellwood (2002) posits, when a brand is perceived to be of high quality, it can command premium prices. Firms can take advantage of this strategy by increasing the existing products lines, which too are likely to attract high prices. Of most importance, branding creates association which are helps the consumers to connect with products and services. To create the right perceptions, a brand needs to be well-positioned. The available literature associates positive brand association with increased loyalty, positive attitudes and feelings (Schultz, 2001). In addition, researchers suggest that firms could take advantage of the brand associations to establish brand extensions, hence improving their bottom-line revenue. As suggested by Wang, Head and Archer (2000) brand associations can positively be impacted on through celebrity endorsements.


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