1. PRICING, DISTRIBUTING, AND PROMOTING PRODUCTS12
PRICING, DISTRIBUTING, AND PROMOTING PRODUCTS
© 2007 Prentice Hall, Inc. All rights reserved.

2. After reading this chapter, you should be able to:
L E A R N I N G O B J E C T I V E S
After reading this chapter, you should be able to:
Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions.
Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices.
Explain the meaning of distribution mix and identify the different channels of distribution.
Describe the role of wholesalers and explain the different types of retailing.
© 2007 Prentice Hall, Inc. All rights reserved.

3. L E A R N I N G O B J E C T I V E S (cont’d)
After reading this chapter, you should be able to:
Describe the role of e-intermediaries and explain how they add value for advertisers and consumers on the Internet.
Define physical distribution and describe the major activities in the physical distribution process.
Identify the important objectives of promotion, discuss the considerations in selecting a promotional mix, and discuss advertising promotions.
Outline the tasks involved in personal selling, describe the various types of sales promotions, and distinguish between publicity and public relations.
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4. What’s in It for Me?
By understanding this chapter’s methods for pricing, distributing, and promoting products, you, too, can benefit in three ways:
As both employee and manager, you’ll be prepared to use the concepts of pricing, distributing, and promoting products in your career.
As a consumer, you’ll have a clearer picture of how a product’s promotion and distribution affect its selling price, causing it to rise or fall.
As a future investor, you’ll be prepared to evaluate a company’s marketing program and its competitive potential before buying the company’s stock.
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5. 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
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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6. 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
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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7. Determining Prices (cont’d)
Cost-Oriented Pricing
Breakeven Analysis
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8. 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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9. 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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10. The Distribution Mix Distribution Mix Intermediaries (middlemen)
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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11. 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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12. Wholesaling Wholesalers Agents and Brokers
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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13. 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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14. Retailing (cont’d) Nonstore Retailing Vending machines
Direct-response retailing
Mail order (or catalog marketing)
Telemarketing
Direct selling
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15. The Importance of 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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16. The Importance of Promotion (cont’d)
Promotional Tools
Advertising
Personal selling
Sales promotions
Publicity
Public relations
Promotional Mix
The combination of promotional tools
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17. 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
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18. Advertising Promotions
Paid, nonpersonal 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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19. Advertising Promotions (cont’d)
Advertising Media
Television
Direct mail
Newspapers
Magazines
Radio
Internet
Outdoor
Other
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20. Personal Selling Personal Selling Personal Selling Tasks
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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21. Sales Promotions Sales Promotions Types of 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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22. Publicity and Public Relations
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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23. K E Y T E R M S advertising advertising media bargain retailer
breakeven analysis
breakeven point
broker
catalog showroom
convenience store
cost-oriented pricing
coupon
creative selling
cybermall
department store
direct channel
direct selling
direct-response retailing
discount
discount house
distribution channel
distribution mix
e-catalog
e-intermediary
electronic retailing
electronic storefront
factory outlet
fixed cost
interactive marketing
intermediary
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24. K E Y T E R M S (cont’d) mail order (catalog marketing) market share
markup
media mix
missionary selling
odd-even pricing
order fulfillment
order processing
penetration pricing
personal selling
physical distribution
point-of-sale (POS) display
positioning
premium
price lining
price skimming
pricing
pricing objectives
private warehouse
promotion
promotional mix
psychological pricing
public relations
public warehouse
publicity
retailer
sales agent
sales promotion
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25. K E Y T E R M S (cont’d) shopping agent (e-agent) specialty store
supermarket
syndicated selling
telemarketing
trade show
variable cost
video marketing
warehousing
wholesale club
wholesaler
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