1. 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

2. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. © 2009 Pearson Education, Inc.2

3. After reading this chapter, you should be able to: 1.Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 2.Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 3.Explain the meaning of distribution mix and identify the different channels of distribution. 4.Describe the role of wholesalers and explain the different types of retailing. L E A R N I N G O B J E C T I V E S © 2009 Pearson Education, Inc.

4. After reading this chapter, you should be able to: 5.Describe the role of e-intermediaries and explain how they add value for advertisers and consumers on the Internet. 6.Define physical distribution and describe the major activities in the physical distribution process. 7.Identify the important objectives of promotion, discuss the considerations in selecting a promotional mix, and discuss advertising promotions. 8.Outline the tasks involved in personal selling, describe the various types of sales promotions, and distinguish between publicity and public relations. © 2009 Pearson Education, Inc.

5. What’s in It for Me? By understanding this chapter’s methods for pricing, distributing, and promoting products, you can benefit in two 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. © 2009 Pearson Education, Inc.

6. 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.

7. 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.

8. 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.

9. FIGURE 12.1 Breakeven Analysis © 2009 Pearson Education, Inc.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. FIGURE 12.2 Channels of Distribution © 2009 Pearson Education, Inc.

16. 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.

17. FIGURE 12.3 The Value- Adding Intermediary © 2009 Pearson Education, Inc.

18. 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.

19. Retailing (cont’d) Nonstore Retailing – Vending machines – Direct-response retailing Mail order (or catalog marketing) Telemarketing Direct selling © 2009 Pearson Education, Inc.

20. 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.

21. 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 e-mailing orders © 2009 Pearson Education, Inc.

22. TABLE 12.1 Top 10 Online Retailers © 2009 Pearson Education, Inc.

23. 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.

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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.

30. FIGURE 12.4 Top 10 National Advertisers © 2009 Pearson Education, Inc.

31. TABLE 12.2 Media Use, Strengths and Weaknesses © 2009 Pearson Education, Inc.

32. 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.

33. 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.

34. 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.

35. Key Terms 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 © 2009 Pearson Education, Inc.

36. Key Terms (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 © 2009 Pearson Education, Inc.

37. Key Terms (cont’d) shopping agent (e-agent) specialty store supermarket syndicated selling telemarketing trade show variable cost video marketing warehousing wholesale club wholesaler © 2009 Pearson Education, Inc.