The previous sections focused on marketing communication and environmental analysis that form the foundation of the marketing plan. This section will explore pricing and channel management, which are two critical aspects of a marketing plan. Pricing has a direct impact on the revenue. Price determines whether the business will make a profit or not. According to Cai & Chen (2017), the pricing and channel management should support the firm’s ability to connect with the target market. Ford’s target market is highly diverse, as such the company’s marketing mix and distribution channels should be varied. Ford should strategize on how to come up with the right pricing and distribution by taking into consideration the internal and external factors, particularly the competition and opportunities in the market.
Pricing Strategy
Ford’s prices vary depending on the target market, product and external factors. The two main pricing strategies applicable to Ford are market-oriented pricing strategy and premium pricing strategy. The objective of the pricing strategy is to enable the organization to achieve its marketing goals (Moreno& Terwiesch, 2015). The marketing objectives include market position leadership, survival, profit maximization, and product quality leadership. Ford came up with the Fiesta model to maximize profit and appeal to the large middle-income earners who are after affordable and quality automobiles.
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Market-Oriented Pricing Strategy
Companies that use the market-based approach evaluate the prices of similar products in the market, as well as the features offered by the competitors. Depending on the prices charged by the competitors, Ford can charge slightly more or less depending on the product features. In the positioning statement, Ford Fiesta is branded as an efficient, safe, durable and high-quality car. Ford Fiesta is suitable for young people who want quality and affordable vehicles at affordable prices. Some of the added features that will be considered in the pricing strategy are the warranty and free repair service within the first three months. Ford Motors want customers to associate efficiency, durability, safety, and uniqueness with Ford Fiesta.
There are factors to consider when using a market-oriented pricing strategy include the demand, life cycle, and productivity. The demand for the product affects pricing such that when the demand is high, the company can set a higher price for the product but when the demand falls, the company uses incentives and discounts to keep customers interested. Ford Fiesta has a high demand; it was the best-selling car in the UK in 2017, but the sales fell short of the 120,000 figure achieved in 2016 (McNamara, 2018). Ford remains the most popular car in the UK, US and other key markets, even though the sales dipped. Ford can afford to charge slightly higher than its competitors because of the high demand for Ford vehicles. Ford has a good reputation among customers, and customers care about the prestige of owning Ford vehicles such that they can overlook the price (McNamara, 2018). However, Ford does not have the luxury to increase its price way beyond the price charged by competitors as it will lose customers.
Another factor that affects market-oriented pricing is the life cycle of the product. Organizations tend to charger a higher price during the growth and the maturity phase. Ford Motors Company is in the maturity phase; it is a household name, and it sold over 6,607,000 vehicles in 2017 (Mao, 2018). Ford Vehicles such as the Ford Fiesta have been on the market for a long time, but Ford keeps introducing new models to meet the needs of the market. Ford charges higher for new models with improved features.
The last factor to consider is price sensitivity. Before implementing a market-based pricing strategy, it is essential to analyze the price sensitivity of the target market. Ford introduced the Fiesta model as a response to increased competition from Toyota, Nissan, and Honda (CSI Market, 2018). The target market for Ford Fiesta is young people and women mostly, unlike the other models that target a broader demographic. Ford Fiesta is a subcompact vehicle targeting middle-income earners. The target market is sensitive to price, but it can comprise when the product has additional features. Ford Fiesta competes with other subcompact models such as Honda Fit, Toyota Yaris, Chevy Sonic and Nissan Versa (CSI Market, 2018). When setting the price, Ford should take into consideration the price charged by competitors and set its price with the competitors' range to appeal to the target market. For example, the price for Honda Fit in 2018 was at $16,190 while a Chevy Sonic was $15, 295. Other models such as the Nissan Versa and Mitsubishi Mirage charge slightly lower. Ford can charge between $14, 000 to $16,000 for Ford Fiesta and it will still be within the range charged by competitors.
On top of the market-based pricing, Ford can use promotions to attract customers. For example, Ford can use cash rebate for sale to attract more customers or give the first 100 customers a discount when opening a new dealership. Customers love promotions, and even those who had no plans on buying a Ford Fiesta can buy it if the promotion is too good. Ford can use promotions to appeal to customers that would have settled for Ford’s competitors with lower prices.
Premium pricing strategy
Ford has an extensive line of products including trucks, automobiles, buses, tractors, automotive parts, and vehicle leasing. Ford cannot use the same pricing strategy for all its product mix as different products attract a different market. Premium pricing strategy is not applicable to the Ford Fiesta, but Ford uses the premium pricing strategy for Lincoln automobiles, which is Ford’s luxury lines of vehicles. Premium pricing strategy target the small luxurious target market made up of individuals across all age groups looking for exclusive, high quality and expensive cars not owned by many.
Channel Management
Another crucial aspect of marketing is channel management. Channel management is the act of developing appropriate marketing techniques and sales strategies to reach potential customers. Channels are ways of availing the products to the customers (Pride & Ferrell, 2010). Channel management aims to maintain effective communication between the organization and the customer. The organization decides on the appropriate channels to distribute the product based on the characteristics of the target market, particularly their needs, buying patterns, and success factors. The right approach to channel management also takes into consideration the goals, policies, product, sales, and marketing plan.
Marketing Channel
Ford Motors predominantly uses a three-tier marketing channel made up of the producer, dealer, and customers. Ford deliver the vehicles and spare parts to the dealers who sell them directly to the customers. Customers from different locations across the globe can access Ford vehicles based on the coverage strategy used by Ford Motors. The coverage strategy determines the accessibility of the product. According to Pride & Ferrell (2010), the three types of the intensity of market coverage are intensive, selective, and exclusive. In intensive distribution, the company all available channels to distribute a product. When using intensive distribution, Ford will not limit itself to dealers only, but it explores other channels such as auto part stores, third-party distributors, and online channels.
Selective distribution strategy is about using the available distribution channels in a given location; for example, if there are no dealers, the Ford Motors might opt to use its showrooms to market its products in a given area. Lastly, exclusive distribution is used for products that are not purchased frequently or those that are consumed over a long period (Pride & Ferrell, 2010). Ford’s luxury line of vehicles uses the exclusive distribution such that customers can only access them in select showrooms. Ford should use intensive distribution for Ford Fiesta in developed markets where the demand for the product is high. However, in developing nations, Ford can use selective or exclusive distribution strategy as per the demand for the product.
Most manufacturers use intermediaries in their distribution network to reach as many customers as possible and to minimize risks. The channel management can give a company an advantage, and the choice of the channel is strongly tied to other aspects of the marketing plan. For example, large-scale dealers can afford to sell vehicles at a slightly low price in comparison to small-scale dealers that carry a few units. An organization has to be careful when deciding on the channel as it can make a difference in customer experience. Once Ford has settled on a particular channel of distribution, it uses the road, rail, air, and water transportation to take the products to the intermediary/ customer.
Cai & Chen (2017) further explore the standard distribution channel used by Ford and its competitors. Car manufacturers mainly focus on using dealers to sell their products. The dealers either belong to the vehicle manufacturer or third parties interested in distributing the vehicles directly to the consumers. Ford uses dealers because they make it easy to reach consumers across the world. Ford relies heavily on fleet sales and internal sales to dealers and distributors that sell them to consumers directly or other smaller dealers. The dealers make an arrangement with Ford regarding price, cost of delivery, and insurance among other issues so that Ford and dealers can benefit. Dealers also play an essential role in marketing products, branding, and additional operations to ensure that the product is in the right shape before selling it to consumers.
Dealers have a fundamental role to play by linking the manufacturer and the customer. Ford sold over 6,607,000 vehicles in 2017, and it would be impossible for Ford to sell them to customers directly (Mao, 2018). Dealers vary in scale, ownership, performance, and the role they play in converting consumer interest into ownership. Notably, the external environmental factors that affect Ford Motors as a company can be felt by the dealers. Dealers that sell Ford products primarily have to compete with dealers that sell Nissan, Toyota or other competitors.
The emergence of e-commerce has changed the approach to channel management (Moreno & Terwiesch, 2015). Ford has taken advantage of e-commerce to sell its products directly to consumers to avoid the costs of dealing with dealers. Some customers also prefer buying their vehicles online because of the one-to-one basis with the manufacturer. Selling vehicles online appeal to the young generation, which is part of the target market for the Ford Fiesta. Ford Motors should explore ways of taking advantage of online channels to attract more consumers locally and internationally. Selling cars online changes the way businesses deal with clients, for example, it changes the approach to aftersales services, mode of payment, and Ford has to ensure that the vehicle is in the right shape or connect customers to nearby shops in case of a problem.
Aside from the technological innovation of e-commerce, technology has made it easy to manage the supply chain. Ford’s supply chain is founded on the two principles of just-in-time inventory and the economic order. Ford uses technology to demand forecast and track sales in real time so that they can make deliveries for the dealers. Technology enables the easy exchange of information to facilitate efficient channel management.
In conclusion, the pricing strategy and channel management are two essential factors in a marketing plan. The pricing strategy takes into consideration internal and external factors. Given the high level of competition, Ford has to use market-based pricing to attract customers. The right channel of distribution involves a dealer as an intermediary because Ford is incapable of meeting the high demand for Ford Fiesta. The choice of distribution channel affects the pricing as well as promotional strategies. Ford should harmonize all the crucial factors of the marketing plan including product, price, promotion, and channel management to achieve its marketing and organizational objectives.
References
Cai, W., & Chen, Y. J. (2017). Channel management and product design with consumers’ probabilistic choices. International Journal of Production Research , 55 (3), 904-923.
Ford Motor Co Comparisons to its Competitors, Market share and Competitiveness by Segment – CSI Market. (2018). Retrieved from https://csimarket.com/stocks/compet_glance.php?code=F
McNamara, P. (2018, Jan. 5). 2017 new car registrations: Vauxhall, diesel and the climate the big losers. Car. Retrieved from: https://www.carmagazine.co.uk/car-news/industry- news/uk-2017-car-sales-analysis-winners-and-losers/
Moreno, A., & Terwiesch, C. (2015). Pricing and production flexibility: An empirical analysis of the US automotive industry. Manufacturing & Service Operations Management , 17 (4), 428-444.
Pride, W., & Ferrell, O. C. (2010). Marketing express . Nelson Education.
