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Marketing Management Session #4 Pricing & Marketing Distribution Channels.

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Presentation on theme: "Marketing Management Session #4 Pricing & Marketing Distribution Channels."— Presentation transcript:

1 Marketing Management Session #4 Pricing & Marketing Distribution Channels

2 Pricing Strategy

3 Generally price is.. The amount of money charged for a product or service So how are Prices Set ???

4 Historically… Prices were usually set by buyers and sellers bargaining with each other. BUT NOW...

5 Price setting is based on… Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) Pricing Decisions

6 Internal Factors: Objectives Marketing Objectives Survival Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business. Current Profit Maximization Choose the Price that Produces the Maximum Current Profit, Etc. Market Share Leadership Low as Possible Prices to Become the Market Share Leader. Product Quality Leadership High Prices to Cover Higher Performance Quality and R & D.

7 Internal Factors: Marketing Mix Price Product Design Distribution Nonprice Positions Promotion

8 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

9 Internal Factors: Organization Consd. Costs/Revenue Output/Sales FC VC TC TR

10 Price setting is based on… Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) Pricing Decisions

11 External Factors: Demand vs. Supply (1)

12 External Factors: Demand vs. Supply (2)

13 Price setting is based on… Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) Pricing Decisions

14 Think about it… VALUE ??? PRICE??

15 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

16 Pricing Approaches

17 General Pricing Approaches 1.Cost-Based Pricing 2.Value-Based Pricing 3.Competition-Based Pricing

18 Product Cost Price Value Customers Customer Value Price Cost Product Cost-Based Pricing Value-Based Pricing

19 Competition-Based Pricing

20 New-Product Pricing Strategies 1.Market-Skimming Pricing : Intel is a prime user of this strategy.

21 New-Product Pricing Strategies 2. Market-Penetration Pricing : Dell uses penetration pricing to sell computers.

22 Marketing Distribution Channels

23 Distribution Channel" can be defined as " all the routes through which a product can pass between its point of production and consumption"

24 Marketing Channel Functions Transporting and storing goods Physical distribution Acquiring and using funds to cover the costs of the distribution channel Financing Assuming some commercial risks by operating the channel (e.g. holding stock) Risk taking Gathering market research data- important for marketing planning Information Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging Matching Reaching agreement on price and other terms of the offer Negotiation

25 Number of Channel Levels Consumer Retailer Producer Retailer Wholesaler Producer Consumer Producer

26 Channel 1 Called a direct-marketing channel Has no intermediary levels It consists of a manufacturer selling directly to consumers Consumer Producer

27 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. Consumer Retailer Producer

28 Channel 3 Contains two intermediary levels, a wholesaler and retailer. This channel is often used by manufacturers of food, drugs, hardware and other products Retailer Wholesaler Producer Consumer

29 Different forms of distribution channels Franchise Agent

30 How to choose the distribution channel ??

31 You must consider: Marketing strategy Financial situation The number of its outlets Choice of its transportation method Company Plan Their abilities to handle promotion, customer contact, storage and credit Ability to deliver the product with required Quality Characteristics of intermediaries Better be similar to competitors channels Using the same channel expected by the customers Competitors' channels

32 Integrated Marketing Communication

33 Marketing Communications The means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell.

34 Communications Environment Two Factors are Changing the Face of Todays Marketing Communications: Improvements in Information Technology Has Led to Segmented Marketing More Narrowcasting Marketers Have Shifted Away From Mass Marketing Less Broadcasting Market Fragmentation Led to Media Fragmentation

35 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.

36 IMC Builds Brands

37 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

38 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

39 Direct Marketing Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail Voice mail Communication Platforms (3) Personal Selling Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows

40 Elements in the Communications Process

41 Designing the Communications Message strategy Creative strategy Message source Personal communication channels Nonpersonal communication channels Integration

42 Advertising Personal Selling Personal Selling Sales Promotion Sales Promotion Public Relations Public Relations Direct Marketing Direct Marketing Reach Many Buyers, Repeat Message Many Times, Impersonal, Expensive Personal Interaction, Relationship Building, Most Expensive Promo Tool Wide Variety of Tools, Rewards Quick Response, Efforts Short-Lived Very Believable, Dramatize a Company or Product Nonpublic, Immediate, Customized, Interactive Setting the Promotion Mix

43 Questions

44


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