Marketing Management Session #4 Pricing & Marketing Distribution Channels.
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Transcript of Marketing Management Session #4 Pricing & Marketing Distribution Channels.
Marketing Management
Session #4Pricing & Marketing
Distribution Channels
Pricing Strategy
Generally price is..
The amount of money charged for a product or service
So how are Prices Set???
Historically…
Prices were usually set by buyers and sellers bargaining with each other.
BUT NOW...
Price setting is based on …
Internal Factors
1. Marketing objectives2. Marketing mix strategy3. Costs4. Organizational considerations
Internal Factors
1. Marketing objectives2. Marketing mix strategy3. Costs4. Organizational considerations
External Factors
1. Nature of the market and demand2. Competition3. Other environmental factors (economy, resellers, government)
External Factors
1. Nature of the market and demand2. Competition3. Other environmental factors (economy, resellers, government)
Pricing DecisionsPricing Decisions
Internal Factors: Objectives
Marketing
Objectives
SurvivalLow Prices to Cover Variable Costs andSome Fixed Costs to Stay in Business.
Current Profit Maximization Choose the Price that Produces the
Maximum Current Profit, Etc.
Market Share LeadershipLow as Possible Prices to Become
the Market Share Leader.
Product Quality LeadershipHigh Prices to Cover Higher
Performance Quality and R & D.
Internal Factors: Marketing Mix
Price
Product Design
DistributionNonpricePositions
Promotion
Internal Factors: Costs
• Costs set the floor for the price.
• Price should covers costs for producing, distributing and selling the product, and provides a good profit.
Cost based pricing
Internal Factors: Organization Consd.Costs/Revenue
Output/Sales
FC
VCTCTR
Price setting is based on …
Internal Factors
1. Marketing objectives2. Marketing mix strategy3. Costs4. Organizational considerations
Internal Factors
1. Marketing objectives2. Marketing mix strategy3. Costs4. Organizational considerations
External Factors
1. Nature of the market and demand2. Competition3. Other environmental factors (economy, resellers, government)
External Factors
1. Nature of the market and demand2. Competition3. Other environmental factors (economy, resellers, government)
Pricing DecisionsPricing Decisions
External Factors: Demand vs. Supply (1)
External Factors: Demand vs. Supply (2)
Price setting is based on …
Internal Factors
1. Marketing objectives2. Marketing mix strategy3. Costs4. Organizational considerations
Internal Factors
1. Marketing objectives2. Marketing mix strategy3. Costs4. Organizational considerations
External Factors
1. Nature of the market and demand2. Competition3. Other environmental factors (economy, resellers, government)
External Factors
1. Nature of the market and demand2. Competition3. Other environmental factors (economy, resellers, government)
Pricing DecisionsPricing Decisions
Think about it…
VALUE ???
PRICE??
Case Study: Iron Industry
• Production of 1 ton costs: L.E 1,500• Transportation costs: L.E 200• Handling costs: L.E 300• Market price: L.E 3,500• Demand >> Supply• Profit maximization strategy• Monopoly• Price control from the government
Pricing Approaches
General Pricing Approaches
.1Cost-Based Pricing
.2Value-Based Pricing
.3Competition-Based Pricing
ProductProduct
CostCost
PricePrice
ValueValue
CustomersCustomers
CustomerCustomer
ValueValue
PricePrice
CostCost
ProductProduct
Cost-Based Pricing Value-Based Pricing
Competition-Based Pricing
New-Product Pricing Strategies
.1Market-Skimming Pricing:
Intel is a prime user of this strategy.
New-Product Pricing Strategies
2 .Market-Penetration Pricing:
Dell uses penetration pricing to sell computers.
Marketing Distribution Channels
“Distribution Channel" can be defined as
"all the routes through which a product can pass between its point of production
and consumption"
Marketing Channel Functions
Number of Channel Levels
ConsumerConsumerRetailerRetailerProducerProducer
RetailerRetailerWholesalerWholesalerProducerProducer ConsumerConsumer
ConsumerConsumerProducerProducer
Channel 1
•Called a direct-marketing channel•Has no intermediary levels• It consists of a manufacturer selling directly
to consumers
ConsumerConsumerProducerProducer
Channel 2
•Contains one intermediary level .•In consumer markets, this level is typically a retailer .•For example, the makers of televisions, cameras,
furniture, major appliances and many other products sell their goods directly to large retailers, which then
sell the goods to final consumers.
ConsumerConsumerRetailerRetailerProducerProducer
Channel 3
•Contains two intermediary levels , a wholesaler and retailer.
• This channel is often used by manufacturers of food, drugs, hardware and other products
RetailerRetailerWholesalerWholesalerProducerProducer ConsumerConsumer
Different forms of distribution channels
•Franchise
•Agent
How to choose the distribution channel??
You must consider:
Integrated Marketing Communication
Marketing Communications
The means by which firms attempt to inform, persuade, and remind
consumers, directly or indirectly, aboutthe products and brands they sell.
Communications Environment
Two Factors are Changing the Face of Today’s
Marketing Communications:
Improvements in Information Technology
Has Led to Segmented MarketingMore Narrowcasting
Marketers Have ShiftedAway From Mass
MarketingLess Broadcasting
M
arke
t Fra
gmen
tatio
n Le
d to
Med
ia F
ragm
enta
tion
Integrated Marketing Communications
With Integrated Marketing Communications (IMC), the Company Carefully Integrates
and Coordinates Its Many Communications Channels to Deliver a
Clear, Consistent, and Compelling Message About the Organization and Its
Product or Service.
IMC Builds Brands
Sales Promotion•Contests, games•Sampling•Trade shows•Coupons•Extra quantity•Gifts
Communication Platforms (1)Advertising
•Print and broadcast ads•Packaging inserts•Motion pictures•Brochures and booklets•Posters•Billboards•Logos•Videotapes
Public Relations•Press kits•Speeches•Seminars•Annual reports•Charitable donations•Publications•Community relations
Communication Platforms (2)Events/ Experiences
•Sports•Festivals•Arts•Causes•Factory tours•Street activities
Direct Marketing•Catalogs•Mailings•Telemarketing•Electronic shopping•TV shopping•Fax mail•E-mail•Voice mail
Communication Platforms (3)Personal Selling
•Sales presentations•Sales meetings•Incentive programs•Samples•Fairs and trade shows
Elements in the Communications Process
Designing the Communications
•Message strategy•Creative strategy•Message source•Personal communication channels•Nonpersonal communication channels•Integration
Advertising Advertising
Personal Selling
Personal Selling
SalesPromotion
SalesPromotion
PublicRelations
PublicRelations
DirectMarketing
DirectMarketing
Reach Many Buyers, Repeat Message Many Times, Impersonal, Expensive
Reach Many Buyers, Repeat Message Many Times, Impersonal, Expensive
Personal Interaction, Relationship Building, Most Expensive Promo Tool
Personal Interaction, Relationship Building, Most Expensive Promo Tool
Wide Variety of Tools, Rewards Quick Response, Efforts Short-Lived
Wide Variety of Tools, Rewards Quick Response, Efforts Short-Lived
Very Believable, Dramatize a Company or Product
Very Believable, Dramatize a Company or Product
Nonpublic, Immediate, Customized, Interactive
Nonpublic, Immediate, Customized, Interactive
Setting the Promotion Mix
Questions