Marketing Management: The Kindle, Essay Example

This paper gives an analysis of the four cardinal components of the marketing mix and looks at how these components have been put into use by Apple Inc in marketing their computers and achieving good market response. The paper also seeks to look at how the said company has responded to changes and pressures at the market place in their efforts to maintain their sales records.

The marketing mix is defined as a set of controllable variables and their levels that an organization uses to influence the market (BPP 2009). The variables are namely product, place, promotion and price. These variables have to give a favorable mix and interplay to secure customer interest and eventual customer satisfaction which is vital in achieving customer loyalty. These variables have been exploited successfully by apple computers to achieve favorable business record and therefore will be looked at separately.

The product is not just a mere thing with desirable features but also a package of benefits designed to meet needs or provide the desired solutions to a customer. Services can therefore be viewed as products in the perspective of the marketing mix. (Pride, W, Ferrell, O.C. 2007).  The product in case is the e-book reader as the core product as well as the augmented products which are the consumer electronics and the ease of access to electronic books that are part of the Kindle products. With the development of unique Kindle 2 product that boasts a sleek product that is geared towards enabling users access any book they need in 60 minutes.

24-Pricing as a Strategy

This element of the marketing mix covers the basic prices, discounts as well as credit terms that a business offers to its customers (BPP 2009). The price is a key factor for the marketing mix as it determines how many of the consumers can afford the product on offer. It also determines the profitability of the product for the producers business. Pricing also forms an integral part of the image. If the product is wrongly priced, it might be taken to be cheap hence substandard. The pricing of the Ipod and the Iphone has set a clear distinction between them and cheap end products. This has also influenced the way most people desire to have an apple product. The pricing of the Kindle has also put them within the affordable market range hence making their demand high and sustainable over a long time.

In determining the price the following three costs will be put into consideration.

• The relevant unit costs of every extra unit of the Kindle will be used to determine the basic cost of production. This will factor in all the man hours and raw materials used to develop the product as well as the research and development costs that went into product development.
• The second part of the pricing will also depend on the general overheads incurred on the product such as administrative cost as well as the marketing and advertisement costs. Supply chain logistics and delivery costs will also be factored in to determine the eventual costs.
• Finally the intended margin will be factored in to determine the eventual selling price of the product. This will ensure that the target profits can be achieved.

Alternative methods in setting prices

Full cost plus pricing

This is a method that involves calculating the full cost of a product and adding a percentage markup to arrive at the price.

Marginal cost-plus pricing

Marginal cost-plus pricing involves adding a profit margin to the marginal cost of production/sales. This involves making considerations to the gross profit contribution of the product.

Market skimming pricing

This is a strategy that involves setting prices that target a specific part of the market to ensure that the product is taken up appropriately.  It involves market penetration pricing where prices are set to attract attention of potential buyers and price skimming where a product can have high initial prices to attract high end buyers as well as fetch high net profits.

Considering that the product being launched has its precursor in the market, the marginal cost plus pricing will not be appropriate as these cannot ignore the existing prices of the precursors as well as the existing market share. The full cost plus pricing is the best option in the current conditions since it will carter for the costs will using the existing market knowledge about similar products.

Pricing promotions

The use of pricing promotions is not available as an option since we do not have similar products to compete with in the market hence it will not be used

Expected profits

By retailing a single unit at $359 and ensuring that the cost of production and the overheads are minimized, we can target to maximize the gross profit margin per product. If the gross profit margin is 20% then the profit per unit

Then the profit per unit is

20% of $ 359 = $72.

If 2 Million units are sold in a year (Assuming that this is all age encompassing product)

Then the profit is $ 72× 2,000,000 = $144,000,000

This is an appreciable profit considering that this is a first time product.

Conclusion

Amazon has to effectively use the marketing mix to achieve good sales and sustain a good market demand. Most important to them is their targeted market. By ensuring that the product is amenable to the use by the people of all generations, they will be able to capture the more vociferous readers of the older generation and not depend on the technophile who might not be financially capable of affording the product. They will also be able to grow their products by partnering with successful publishers and authors to reach the market

References

BPP Learning Media (2009). Marketing Management. London. BPP Publications

Pride, W., Ferrell, O.C. (2007). Foundations of Marketing: Revised Second Edition. Boston: Houghton Mifflin.

The Economist. Well read; Electronic-book readers. London (UK): Feb 13, 2009. Available. http://proquest.umi.com/pqdweb?did=1646096131&sid=3&Fmt=3&clientId=29440&