12

chapter

Business Essentials, 7th EditionEbert/Griffin

© 2009 Pearson Education, Inc.

Pricing, Distributing and Promoting Products

Instructor Lecture PowerPoints

PowerPoint Presentation prepared by

Carol Vollmer Pope Alverno College

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 share—a company’s percentage of the total industry’s sales for a specific product type

© 2009 Pearson Education, Inc.

Determining Prices (cont’d)

• Price-Setting Tools – Cost-Oriented Pricing

• Considers the firm’s 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 = Seller’s cost + profit

price Sales

Markup percentage Markup

© 2009 Pearson Education, Inc.

Determining Prices (cont’d)

cost Variable - Price

costs fixed Total units) (in point Breakeven

• 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

© 2009 Pearson Education, Inc.

FIGURE 12.1 Breakeven Analysis

© 2009 Pearson Education, Inc.

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 profit—may generate a large profit on each item sold

– Penetration pricing• Setting an initially low price to establish a new product in the

market

© 2009 Pearson Education, Inc.

Pricing Strategies and Tactics (cont’d)

• 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-to-customer basis

– At present, fixed pricing is still the most common option for cybershoppers

© 2009 Pearson Education, Inc.

Pricing Strategies and Tactics (cont’d)

• 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

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

The Distribution Mix (cont’d)• 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

© 2009 Pearson Education, Inc.

FIGURE 12.2 Channels of Distribution

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

FIGURE 12.3 The Value-Adding Intermediary

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

Retailing (cont’d)

• Nonstore Retailing– Vending machines

– Direct-response retailing• Mail order (or catalog marketing)

• Telemarketing

• Direct selling

© 2009 Pearson Education, Inc.

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 consumers2. 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.

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

TABLE 12.1 Top 10 Online Retailers

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

Physical Distribution (cont’d)• 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

© 2009 Pearson Education, Inc.

Physical Distribution (cont’d)• 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

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

The Importance of Promotion (cont’d)

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

• Promotional Mix– The combination of promotional tools

© 2009 Pearson Education, Inc.

The Importance of Promotion (cont’d)• 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

© 2009 Pearson Education, Inc.

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

seller’s message to potential customers• Media Mix

– The combination of media through which a company advertises

© 2009 Pearson Education, Inc.

FIGURE 12.4 Top 10 National Advertisers

© 2009 Pearson Education, Inc.

TABLE 12.2 Media Use, Strengths and Weaknesses

© 2009 Pearson Education, Inc.

Personal Selling

• Personal Selling– A salesperson communicates one-to-one with

potential customers to identify their needs and align them with the seller’s products

• Can be the most expensive form of promotion

• Personal Selling Tasks– Order processing– Creative selling– Missionary selling

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.

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

© 2009 Pearson Education, Inc.