Black Pearls

Marketing Channel 353

Chapter 11

Issue of Discussion: Black Pearls

List of Players: Arden Company manufacture of Black Pearl, Retailers, Consumers

Channel of Distribution:

[pic 1]

        Arden Company [pic 2]

        Manufacture of Black

        Pearls Fragrance

[pic 3]

        Retailers

        Department Store: Macy (Specialty

        Retailer)

                 (National Chain)

[pic 4]

        [pic 5]

List of Concepts:

1. Pricing- analogous to whom gets what “piece of the pie.” All channel members want a part the total price (the price paid by the final buyer) sufficient to cover their costs and provide a desired level of profit.
2. Pricing controls- manufacture seeks to exercise control over channel ,ember pricing polices.
3. Pricing policies- channel member reactions to major changes in manufacture’s pricing policies and related terms of sale.

Relevant Concepts:

1. Obviously pricing is a factor in this case, when creating a pricing strategy one must consider internal cost, target market and competitive considerations, but most importantly channel considerations. However, channel considerations tend to be most ignored which is what has occurred by the decrease in contribution from 5% to 3%. Cause of the lack of support from the Arden Company, channel members behavior is negative and the stores refused to stock Black Pearls.
2. In this case, the manufacture had a bit of coercion thus causing channel members not to cooperate.  
3. In this case the Arden Company alienated retailers such as Macy’s and Dillard cause it had cut the contribution it pays to help cover salaries of counter salespeople to 3% of retail sales for the new fragrance from the usual industry standard of 5%. As a result, channel members were not happy about the change in policy thus refusing to stock Black Pearls.

Author Thoughts: There are eight guidelines suggested for an effective pricing strategy. In terms of this case, the Arden Company needs to first create a profit margin that covers cost and provide reasonable  1. Each efficient reseller must obtain unit profit margins in excess of unit operating costs