chapter 12 pricing, distributing, and promoting products
DESCRIPTION
Chapter 12 Pricing, Distributing, and Promoting ProductsTRANSCRIPT
12
chapter
Business Essentials, 7th EditionEbert/Griffin
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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
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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
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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
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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 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
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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
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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
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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 (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
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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 Value-Adding 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 (cont’d)
• 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 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.
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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 (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
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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
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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 (cont’d)
• 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 (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
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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
seller’s 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 seller’s 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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