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12 chapter Business Essentials, 7 th Edition Ebert/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 © 2009 Pearson Education, Inc.
Determining Prices (cont’d) 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 consumers 2.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 ing orders © 2009 Pearson Education, Inc.
TABLE 12.1 Top 10 Online Retailers © 2009 Pearson Education, Inc.
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 – 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 – 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.
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