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

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Med

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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