The trade and industry factors that have an impact on sales volumes will shift whenever rules and regulations, technology, market information, consumer tastes and variable costs change. The growing concern of a company is, therefore, determined by its adaptability to the dynamic business environment along with its pricing strategies. A successful company also recognizes the challenges that come with embracing change in order to fit in the market. Sometimes, an organization’s leadership may come up with a great marketing plan that sounds excellent among its proponents only for the plan to fail when it is put into action.
After running for eighteen months, the Pro-Audio Sales Agent Program received praise and criticism in equal measure. Pro-Audio Sales Agent Program was hailed for its ingenuity in curbing the menace of discounting that jeopardized the studio equipment industry. The plan ensured that customers had their orders placed directly to the factory at a fixed price with no room for negotiation. Prior to putting a stop to direct sales, customers could negotiate the price on the equipment. On the other hand, administrative bureaucracies exasperated irate consumers. As a result, sales of the PSX-360 sound equipment plummeted.
Although the PSX-360 was a good product, the administration challenges involved as a result of the Pro-Audio Sales Agent Program resulted in low sales. Even after the implementation of the program, some retailers were still undercutting the fixed price and the process of placing orders directly with the manufacturer.
Pro-Audio made a reactive rather than an anticipatory strategic price decision. A proactive pricing strategy is more ideal as it develops strategies in advance to deal with unforeseeable circumstances (Nagle and Hogan 6). When managers are conflicted in their motives to set a price strategy, they mostly come up with reactive strategies aimed at boosting sales rather than reactive ones that are long-term (Nagle and Hogan 159). The Pro-Audio Sales Agent Program was developed to eliminate the dealers in Los Angeles and in New York that were causing other dealers to lose sales due to their discount offers that translated to low prices. The pricing decision was also made in order to protect the image of the PSX-360 that was being damaged by the retail discounting. Consumers are price sensitive, and information about good deals is meant to spread fast. The fact that customers would prefer dealers with the most affordable prices should have been anticipated and dealt with beforehand (Nagle and Hogan 1).
Pro-Audio should abandon the program to allow for flexibility in the purchasing process and administrative process. It provides a loophole for a competitor to penetrate the market with a similar or better product than the PSX-360 without the administrative and product accessibility hassles. While the audio device offers quality, consumers look at more than just price and quality of the product when making purchase decisions. Customer satisfaction is driven by value and affordability (Nagle and Hogan 4). They also determine convenience in terms of location and time taken between purchase time and delivery of the product. If an alternative supplier is offering the same quality of product with a convenient purchasing process, the convenient supplier would be ideal to most buyers.
Firms that develop and implement value-based pricing strategies are more likely to achieve high operating incomes as opposed to those that apply pricing strategies based on market share and target margins (Nagle and Hogan 1). Pro-Audio’s pricing strategies were not value based, but market and trade margin oriented. Their pricing strategies should shift to value-based even as they seek to protect their product brand.
Steve Marsh would recommend maintaining the $12,000 price of the PS-360. It would protect the brand image of the product as was originally intended through eliminating the retail discounts. He could suggest a system that would make the PSX-360 more accessible as opposed to strictly placing orders from the factory. Pro-Audio could commission selected dealers to sell the PSX-360 at $12,000, who would be required to provide evidence of the sale at the said price. Consumers would be advised on outlets to get the product in order to avoid the former undercutting of prices and retail discounting. Once the PSX-360 was accessible, lowering the price would expand the market share of high-end consumer goods because a lower price would seem like a discount (Nagle and Hogan 1).
The advantage of abandoning the Pro-Audio Sales Agent Program would be the prevention of further negative impacts of low sales and administrative challenges. When customers are taken through a rigorous purchase process, they will prefer a competitor offering the same product with a simple purchase process.
There would be several disadvantages. If the Pro-Audi Sales Agent Program was successful in eliminating retail discounts that jeopardized the value of the PSX-360, a competitor may take up the idea and use it to their advantage with affordable audio products. Pro-Audio may be perceived to be indecisive and unstable in their decision-making processes, after dropping a seemingly successful program after only eighteen months of operation. There is also no guarantee that an alternative solution will work to increase sales or get rid of retailers that undercut the factory price.
The change would result in a flexible administrative outfit, increase in sales volumes, satisfied customers, and satisfied dealers. Through a flexible administrative system, their market share of high-priced product consumers would remain intact. A value-based pricing model would achieve this because customers would be willing to spend money on the value they get from purchasing a product as opposed to the product itself (Nagle and Hogan 12). The PSX-360 would be accessible to potential consumers that favor a simple purchase process. Dealers would have autonomy of their businesses by selling the PSX-360 directly at a stipulated price. It would further prosper their businesses due to the fixed price and a guaranteed margin. It would ensure that dealers do not lose customers to other dealers after educating consumers on the PSX-360. A uniform price on the product would allow dealers to offer after sales services within their areas, which would be a good value added after-sales service.