BUSINESS 1 Marketing in a Changing World: Creating Customer Value and Satisfaction

BUSINESS 2 What Is Pricing? Process of determining what a company will receive in exchange for its products

BUSINESS 3 Pricing to Meet Business Objectives  Pricing objectives are goals that producers hope to attain in pricing products for sale  Profit-Maximizing Objectives  Pricing for E-Business Objectives  Market Share Objectives  Market share is a company’s percentage of total market sales for a specific product type  Other Pricing Objectives

BUSINESS 4 Pricing Existing Products  Pricing above prevailing market prices for similar products  Pricing below market prices  Pricing at or near market prices

BUSINESS 5 Pricing New Products  Price skimming is setting an initial high price to cover new product costs and generate a profit  Penetration pricing is setting an initial low price to establish a new product in the market

BUSINESS 6 Cost-Oriented Pricing  Cost-oriented pricing considers the firm’s desire to make a profit and its need to cover production costs  Markup is the amount added to an item’s cost to sell it at a profit

BUSINESS 7 Breakeven Analysis  Breakeven analysis assesses costs versus revenues for various sales volumes  Variable cost is a cost that changes with the quantity of a product produced or sold  Fixed cost is a cost unaffected by the quantity of a product produced or sold  Breakeven point is the sales volume at which the seller’s total revenue from sales equals total costs with neither profit nor loss

BUSINESS 8 Breakeven Analysis

BUSINESS 9 Fixed versus Dynamic Pricing for E-Business  Dynamic pricing works because information flow on the Web notifies millions of buyers of instantaneous change in product availability.  Sellers can alter prices privately, on a one-to- one, customer-to-customer basis.  Fixed pricing is still the most common option for cybershoppers.

BUSINESS 10 Pricing Tactics  Price lining is setting a limited number of prices for certain categories of products  Psychological pricing takes advantage of the fact that consumers do not always respond rationally to stated prices  Odd-even pricing is based on the premise that customers prefer prices not stated in even dollar amounts  Discount is a price reduction offered as an incentive to purchase

BUSINESS 11 Distributing Products

BUSINESS 12 What Is the Distribution Mix? The combination of distribution channels by which a seller gets its product to end users

BUSINESS 13 The Value-Adding Intermediary

BUSINESS 14 Intermediaries and Distribution Channels  Intermediaries (once called middlemen) help to distribute a producer’s goods  Wholesalers are intermediaries who sell products to other businesses for resale to final consumers  Retailers sell products directly to consumers

BUSINESS 15 What Is a Distribution Channel? Network of interdependent companies through which a product passes from producer to end user

BUSINESS 16 Channels of Distribution

BUSINESS 17 Distribution of Consumer Products  Channel 1: Direct Distribution of Consumer Products  Direct channel occurs when the product travels from producer to consumer without intermediaries  Channel 2: Retail Distribution of Consumer Products  Channel 3: Wholesale Distribution of Consumer Products  Channel 4: Distribution through Sales Agents or Brokers  Sales agents (or Brokers) represent producers and sell to wholesalers, retailers or both

BUSINESS 18 The Pros and Cons of Nondirect Distribution  Each link in the distribution chain makes a profit by charging a markup or commission.  The more members in the channel—the more intermediaries—the higher the final price.  Markup levels depend on competitive conditions and practices in a particular industry.

BUSINESS 19 Distribution Strategies  Intensive distribution is a strategy by which a product is distributed through as many channels as possible  Exclusive distribution is a strategy by which a manufacturer grants exclusive rights to distribute or sell a product to a limited number of wholesalers or retailers

BUSINESS 20 Distribution Strategies  Selective distribution is a strategy by which a company uses only wholesalers and retailers who will give special attention to specific products

BUSINESS 21 Channel Conflict and Channel Leadership  Channel conflict occurs when members of the channel disagree over roles or rewards  Channel Leadership  Channel captain is a channel member who is most powerful in determining the roles and rewards of the others members

BUSINESS 22 What Is Physical Distribution? Activities needed to move a product efficiently from manufacturer to consumer

BUSINESS 23 Types of Warehouses  Public and Private Warehouses  Private warehouses are owned by and providing storage for a single company  Public warehouses are independently owned and operated  Storage Warehouses and Distribution Centers  Storage warehouses provide storage for extended periods  Distribution centers provide short-term storage of products whose demand is both constant and high

BUSINESS 24 Warehousing Costs  Inventory control tracks inventory on hand and ensures that an adequate supply is in stock at all times  Materials handling involves the transportation, arrangement and orderly retrieval of inventoried goods  Unitization is a strategy that calls for standardizing the weight and form of materials

BUSINESS 25 Transportation Operations  Major transportation modes:  Trucks  Railroads  Planes  Water carriers  Pipelines

BUSINESS 26 Transportation Operations  Factors in choosing transportation methods:  Cost  Nature of the product  Distance  Speed  Customer wants and needs