12 chapter

Pricing, Distributing and Promoting Products

Business Essentials, 7th Edition Ebert/Griffin

Instructor Lecture PowerPoints

PowerPoint Presentation prepared by Carol Vollmer Pope Alverno College

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Determining Prices
Pricing to Meet Business Objectives
Pricing objectives
The goals that sellers hope to achieve in pricing products for sale

Profit-maximizing pricing objectives

Setting prices to sell the number of units that will generate the highest possible total profits Revenues = Selling Price x Units Sold

Market share objectives

Using pricing to establish market sharea companys percentage of the total industrys sales for a specific product type

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Determining Prices (contd)

Price-Setting Tools
Cost-Oriented Pricing
Considers the firms desire to make a profit and its need to cover production costs Variable costs: Costs that change with the number of units of a product produced and sold Fixed costs: Costs such as insurance and utilities that must be paid regardless of the number of units produced and sold Selling price = Sellers cost + profit

Markup Markup percentage Sales price

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Determining Prices (contd) Breakeven Analysis

Shows, at any selling price, the amount of loss or profit for each possible volume of sales Breakeven point: Number of products that must be sold so total revenues exactly cover both fixed and variable costs
Total fixed costs Breakeven point (in units) Price - Variable cost
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FIGURE 12.1 Breakeven Analysis

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Pricing Strategies and Tactics Pricing Existing Products

A firm has three options for pricing existing products:
Pricing above prevailing market prices for similar products Pricing below market prices Pricing at or near market prices

Pricing New Products

Price skimming
Setting an initially high price to cover costs and generate a profitmay generate a large profit on each item sold

Penetration pricing
Setting an initially low price to establish a new product in the market
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Pricing Strategies and Tactics (contd)

Fixed Versus Dynamic Pricing for E-Business
To attract sales that might be lost under traditional fixed-price structures, sellers alter prices privately, on a one-to-one, customer-tocustomer basis At present, fixed pricing is still the most common option for cybershoppers

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Pricing Strategies and Tactics (contd)

Pricing Tactics
Price lining
Offering all items in certain categories at a limited number of prices (price points)

Psychological pricing
Odd-even pricing: Customers prefer prices that are not stated in even dollar amounts Discounts: Price reductions that stimulate sales

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The Distribution Mix Distribution Mix

The combination of distribution channels by which a firm gets products to end users

Intermediaries (Middlemen)
Help distribute goods, either by moving them or by providing information that stimulates their movement from sellers to customers Can provide added value by saving consumers both time and money
Wholesalers sell products to other businesses for resale to final consumers Retailers sell products directly to consumers
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The Distribution Mix (contd) Distribution Channel

Path a product follows from producer to end user

Popular Paths
Channel 1: Direct distribution (direct channel) Channel 2: Retail distribution Channel 3: Wholesale distribution Channel 4: Distribution by agents or brokers

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FIGURE 12.2 Channels of Distribution

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Wholesaling
Wholesalers
Independent operations that sell consumer or business goods
Buy products from manufacturers and sell them to other businesses, and usually provide storage and delivery Provide additional value-adding services for customers

Agents and Brokers

Sales and merchandising representatives for producers or sellers
Do not own inventory, but manage it for producers

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FIGURE 12.3 The ValueAdding Intermediary

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Retailing
Types of Retail Outlets
Product line retailers carry broad product lines
Department stores and supermarkets

Specialty stores carry one line of related products Bargain retailers carry wide ranges of products and come in many forms
Discount houses, catalog showrooms, factory outlets, wholesale clubs

Convenience stores offer accessible locations and ease of purchase

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Retailing (contd)
Nonstore Retailing
Vending machines
Direct-response retailing
Mail order (or catalog marketing) Telemarketing Direct selling

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The Ascent of the E-Intermediary

E-Intermediaries
Internet-based channel members who perform one or both of two functions:
1. Collect information about sellers and present it to consumers 2. Help deliver Internet products to buyers

Types of E-Intermediaries
Shopping agents (e-agents) help Internet consumers by gathering and sorting information. Electronic retailing is made possible by communications networks that enable sellers to post product information on consumers PCs.

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Electronic Retailing
Electronic Catalogs (E-catalogs)
Use the Internet to display products

Electronic Storefronts (virtual storefronts)

A website from which consumers collect information about products, place orders, and pay for purchases

Cybermalls
Collections of virtual storefronts representing diverse products

Interactive and Video Marketing

Lets viewers shop at home by phoning in or e-mailing orders
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TABLE 12.1 Top 10 Online Retailers

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Physical Distribution
Physical Distribution
The activities needed to move products from manufacturer to consumer
Makes goods available when and where consumers want them Keeps costs low Provides services to satisfy customers

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Physical Distribution (contd)

Warehousing Operations
Private warehouses are owned by producers Public warehouses provide rented storage space

Transportation Operations
Principal differences are speed and cost

Transportation Modes
Trucks Planes Water carriers Railroads Pipelines

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Physical Distribution (contd) Physical Distribution and E-Customer Satisfaction

Order fulfillment
Involves getting the product to each customer in good condition and on time

Distribution as a Marketing Strategy

Distribution is an increasingly important way of competing for sales. For some firms distribution is a cornerstone of business strategy

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The Importance of Promotion

Promotion
The techniques a firm uses for communicating information about products

Promotional Objectives
To communicate information To position products To add value To control sales volume

Positioning
Establishing an easily identifiable product image in the minds of consumers by fixing, adapting, and communicating the nature of the product itself

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The Importance of Promotion (contd)

Promotional Mix Tools
Advertising Personal selling Sales promotions Publicity and public relations

Promotional Mix
The combination of promotional tools

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The Importance of Promotion (contd)

Matching Promotional Tools with Stages in the Buyer Decision Process:
Buyers recognize the need to make a purchase
Best tool: advertising and publicity

Buyers search for information about products

Best tool: advertising and personal selling

Buyers compare benefits and features of competing products

Best tool: personal selling

Buyers choose products that are a good value and buy them
Best tool: sales promotion and personal selling

Buyers evaluate products after the purchase

Best tool: advertising and personal selling
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Advertising Promotions Advertising

Paid, non-personal communication by which an identified sponsor informs an audience about a product

Advertising Media
The specific communication devices for carrying a sellers message to potential customers

Media Mix
The combination of media through which a company advertises
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FIGURE 12.4 Top 10 National Advertisers

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TABLE 12.2 Media Use, Strengths and Weaknesses

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Personal Selling Personal Selling

A salesperson communicates one-to-one with potential customers to identify their needs and align them with the sellers products
Can be the most expensive form of promotion

Personal Selling Tasks

Order processing Creative selling Missionary selling
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Sales Promotions Sales Promotions

Short-term promotional activities designed to encourage consumer buying, industrial sales, or cooperation from distributors

Types of Sales Promotions

Samples Coupons Premiums Contests Point-of-sale displays Trade shows
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Publicity and Public Relations

Publicity
Information about a company, a product, or an event transmitted by the general mass media to attract public attention

Public Relations
Company-influenced publicity that seeks either to build good relations with the public or to deal with unfavorable events

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