2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 1 10-1...

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

C H A P T E R 10SLIDE 1

10-110-1 Marketing Basics

10-210-2 Develop Effective Productsand Services

10-310-3 Price and Distribute Products

10-410-4 Plan Promotion

1010C H A P T E R

MarketingMarketing

© 2012 Cengage Learning. All Rights Reserved.SLIDE 2

10-310-3 Price and Price and Distribute ProductsDistribute Products

Goal 1 Discuss how the selling price of a product is calculated.

Goal 2 Differentiate between a direct and an indirect channel of distribution.


C H A P T E R 10SLIDE 3KEY TERMS

● Price● The money a customer must pay for a product or

service● Distribution

● The location and methods used to make a product or service available to the target market

● Channel of Distribution● The route a product follows and the businesses

involved in moving a product from the producer to the final consumer


C H A P T E R 10

Key Terms (cont’d.)● Channel Members

● Businesses that take part in a channel of distribution

● Retailer● The final business organization in an indirect

channel of distribution for consumer products

SLIDE 4



VALUE AND PRICE

● Buyers usually want to pay the lowest price possible.

● Sellers want to charge the highest price possible.



PRICING FACTORSFactors influencing the price paid for a product:●Supply and demand

● High supply = lower prices● High demand = higher prices● Low supply = higher prices● Low demand = lower prices

●Uniqueness● Products with few close competitors will have

higher price


C H A P T E R 10Pricing Factors (cont’d.)

● Age● When product first introduced, prices will be

higher● As products age, prices decrease

● Season● High sales for a short time and almost no sales

for rest of year (holiday decorations)● Higher prices just before and at beginning of

season – lower prices other times of year

SLIDE 7


C H A P T E R 10Pricing Factors (cont’d.)

● Complexity● Highly complex and technical products and

products with many features and options have higher prices than simple products

● Convenience● People pay for convenience● Customers expect lower prices at large

warehouses that are not as convenient

SLIDE 8


C H A P T E R 10SLIDE 9PRICE A PRODUCT

● Selling price – price paid by the customer

● Product costs – costs to the manufacturer of producing the product or the price paid by other businesses to buy the product

● Operating expenses – all expenses of operating the business that are associated with the product

● Profit – amount of money available after all costs and expenses have been paid

Sellingprice = Product

costs + Operating expenses + Profit


C H A P T E R 10

GROSS MARGIN

● The difference between the selling price and the product costs

● It represents the amount of money on hand to pay for operating expenses and provide a profit

SLIDE 10

Gross Margin = Selling price - Product costs


C H A P T E R 10SLIDE 11MARKUP

● The amount added to the cost of a product to set the selling price

● Equal to the expected gross margin● Stated as a percentage of the product’s cost or

as a percentage of the product’s selling price● Markup on cost =

product costs x percent markup● Markup on selling price =

gross margin ÷ selling price


C H A P T E R 10SLIDE 12MARKDOWN

● A reduction from the original selling price● Thought of as a pricing mistake because it

reduces the amount of money to cover operating expenses and profits

● Reasons for markdowns● Low demand● End of season● Flaws


C H A P T E R 10SLIDE 13CHANNELS OF DISTRIBUTION

● Distribution involves determining the best methods and procedures to use so customers can find, obtain, and use a product or service

● Channel of Distribution is the route a product follows and the businesses involved in moving a product from the producer to the final consumer


C H A P T E R 10Need for distribution channels

● Differences in quantity● Business produce large amounts of products● Consumers need only a small number of

products at any given time● Differences in assortment

● Business typically specialize in producing a specific type of product

● Consumers want a variety of products

SLIDE 14


C H A P T E R 10Need for distribution channels

● Differences in location● Products may be located in other countries

and/or thousands of miles away● Differences in timing

● More efficient for businesses to produce a large quantity at one time

● Consumers may want to purchase at different times than when produced

SLIDE 15


C H A P T E R 10Channels and channel members● Channel Members – businesses that take part

in a channel of distribution● Two types of channels:

● Direct channel of distribution ● products move from the producer straight to the

consumer with no other organization participating● Indirect channel of distribution

● includes one or more other businesses between the producer and consumer

● Wholesalers – intermediaries between manufacturers and retailers

● Retailers – final business organization in an indirect channel of distribution for consumer products

SLIDE 16

2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 1 10-1...

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