Joy Daycare pricing strategy
Consumers within Joy Daycare target market are most likely to be concerned with quality than price. As identified previously, this target market consists of young parents who are sensitive to quality care for their children, and less concerned about pricing issues.
This implies that, although penetration pricing is the easiest for while introducing a new product, it might not be effective under these circumstances (Iacobucci, 2011). The latter author also underscores that penetration pricing (setting lower prices) is extremely risky since competitors’ might decide to retaliate.
Furthermore, reduction in price conflicts with Joy Daycare product and branding strategies. Consequently, premium (skimming) strategy will be adopted based on the belief that quality will mitigate price sensitivity among consumers.
According to Iacobucci (2011), skimming involves setting the pricing above the current market rates at the initial stages of introducing a new product. However, this strategy is short lived because it attracts other firms into the market.
Pricing tactics
Cost based vs. value based pricing
According to Rao (2009), pricing is a significant, but delicate component of marketing mix. Apparently, pricing can either make or break a product, thus optimum care is necessary while making this significant business decision. This is because for a product to survive, it must be tolerable to the target market to promote profitability.
This implies that, the most fundamental pricing tactic should aim to satisfy cost and value criterion. On the same note, pricing for Joy Daycare services will consider the cost and value aspect, commonly referred as ‘cost-based pricing’ and ‘value-based pricing’(Rao, 2009).
As epitomized elsewhere in this marketing plan, Joy Daycare will strive to hire the best caregivers to ensure that children receive quality training. Obviously, this is going to increase business operation costs; hence, penetration pricing cannot work in our favor.
Secondly, we also have to consider the perceived value of Joy Daycare services before settling on a certain price. Rao (2009) underscores that, value-based pricing is founded on the customers’ perspective about whether consumers considers the price to be reasonable.
Discounted and/or differential pricing
Similarly, Joy daycare will offer some discounts to parents who enroll two or more children to the center. Moreover, to promote word of mouth advertising we are going to offer some special rates to those who refer their friends to the center.
According to Rao (2009), differential pricing is not a unique phenomenon and most marketers have utilized it to promote customer royalty. Similarly, Iacobucci (2011) utilizes the term ‘target pricing’ whereby different prices are charged to customers within the same target market.
However, although this strategy might work in the business’ favor, it might be ineffective in the long run especially when one child attains pre-schooling age.
This implies that, the business will face an immense public relations challenge while trying to convince such parents to adjust their payments upwards. Nonetheless, the business will have to bear those costs since the benefits of discounted pricing are likely to be more than the costs involved.
Legal and ethical issues of pricing tactics
Noticeably, competition among businesses has become the biggest hurdle towards success. Against this background, some unscrupulous marketers may misuse the pricing aspect to shove off their competitors out of business. Moreover, some tactics might be exploitative to customers.
On this notion, several business laws have been put in place to eliminate unlawful and unethical pricing strategies. As a result, it is imperative to explore some ethical and legal implications of the pricing tactics adopted by Joy Daycare.
For instance, discounted and/or differential pricing might be perceived as discriminatory since the consumers are purchasing a similar service, but at different prices. However, as long as Joy Daycare can prove that the strategy does not favor some customers at the expense of others, then the tactic is neither illegal nor unethical.
Joy daycare distribution channel
Daycare service is a unique product that defies the norms of marketing distribution channels. Iacobucci (2011) accentuate that distribution channels are adopted depending on the desired promotional and place marketing mix aspects.
Since daycare service is consumed at the place of purchase, the wholesaler/distributor/ retailer relationships are not applicable in this marketing plan. Consequently, Joy Daycare services utilizes exclusive distribution channel because the service is restricted to a centralized location.
This is implies that, the producer (Joy daycare center) interacts directly with the consumer (parents) without the necessity of middlemen services. On the same note Iacobucci (2011) adds that good/service that adopts exclusive distribution channels demands additional promotional aspect in order to educate the target market on the availability and advantages of those products.
As epitomized elsewhere in this marketing plan, quality and excellent service is the core differentiation strategy for Joy Daycare business. The key to the business success calls for heightened efforts to generate consumer delight at the point of service delivery in order to achieve the stipulated marketing objectives.
Consumer delight will enable Joy Daycare to cultivate consumer loyalty; thus increased enrollment will enable the business to achieve the targeted growth rate of 10% p.a. Moreover, brand image will also benefit from the cultivated loyalty.
References
Iacobucci, D. (2011). Marketing management: 2010 custom edition. Mason, OH: South- Western Cengage Learning.
Rao, V. R. (2009).Handbook of pricing research in marketing. Cheltenham: Edward Elgar Publishing.