Pricing Strategy and Distribution

The main issue here is whether you will be priced higher than, lower than, or about the same as your competition. If you decide on a higher price, can you prove to your customers that your higher price is justifiable because of your higher quality product or service? If you choose a lower pricing strategy, can you be assured of profitability at this price? Can you afford lower prices because you have lower costs? Also to consider: it is much easier to lower prices than raise them if you find your costs are higher than you anticipated.

Also consider in this section the methods of payment you intend to accept (cash, checks, credit cards, billing on credit) and the costs associated with each (bad checks, credit card fees). Your pricing explanation should also include any planned discounts for prepayment or high-volume orders.

If you sell directly the end-user, you will not have to include an explanation of distribution. But if you are a manufacturer, you need to discuss how you will get your product out to customers? Will you sell wholesale and have someone else sell your product retail? Will you make your product available through catalogers or a web site? Most importantly, you will need to explain the costs associated with your distribution arrangements.

Branding and Product Positioning

Your overall marketing strategy is the first part of developing the marketing section of your business plan. What is it you want to accomplish with your marketing effort? More sales, probably, but in what way? Most new businesses concentrate on branding and then market penetration as their basic strategy. Another important element of your strategy involves how you are going to position your product or service in relation to the competition.

It is important to check whether this strategy is realistic given the financial situation and capacity of your business.

In the last section of the business plan, you identified individuals who were or were likely to be your customers. In this section, it is important to describe how you will bring what you offer to their attention, how you will appeal directly to them in a way that will motivate them to buy. Do you have any evidence of customer reaction to your product and to the image that product conveys?

How do you want your company and your product to be perceived? Is it cutting edge and young, is it established and reliable, is it flexible and customized by the type of customer? You convey that image – with your logo, by the employees you hire and who represent your business to the customer, and in your product design.

Part of that image is how a company positions its product offerings in the marketplace. There are some well-known examples of the positioning intent of companies that you can see from the slogans they chose. For instance:

Quality – “Quality is Job 1” (Ford Motor Company)
Availability – “It’s everywhere you want to be.” (VISA)
Customization – “The perfect PC for you at the right price for you.” (Dell)
Dependability – “You’re in good hands.” (Allstate Insurance)
New, Cutting-edge– “Just slightly ahead of our time.” (Panasonic)
Speed – “When it absolutely, positively has to be there overnight.” FedEx
Hip/Counter-culture – Yahoo (stands for Yet Another Hierarchical Officious Oracle)

You don’t need a clever slogan to know how you want your company and your products to be perceived by the marketplace. But you do need to set your intention and deliver to the expectations you set.