Transcript The Distribution Mix

Chapter Twelve
Pricing, Distributing, and Promoting
Products
LEARNING OBJECTIVES
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, identify the
different channels of distribution, and describe the major
activities in the physical distribution process.
4. Describe the role of wholesalers and explain the different
types of retailing.
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L E A R N I N G O B J E C T I V E S (cont.)
After reading this chapter, you should be able to:
1.
Describe how online shopping agents and online retailers
add value for advertisers and consumers on the Internet.
2.
Identify the important objectives of promotion, discuss the
considerations in selecting a promotional mix, and discuss
advertising promotions.
3.
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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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.
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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
12-5
Determining Prices (cont.)
• 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
Marku
Markup
percentag

Sales
price
12-6
Determining Prices (cont.)
• 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
Tota
fixe
co
Breakeve
point
(in
units)

Price
Var
co
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FIGURE 12.1 Breakeven Analysis
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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
12-9
Pricing Strategies and Tactics (cont.)
• 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-tocustomer basis
• At present, fixed pricing is still the most common
option for cybershoppers
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Pricing Strategies and Tactics (cont.)
• 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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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
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The Distribution Mix (cont.)
• 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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FIGURE 12.2 Channels of Distribution
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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
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FIGURE 12.3 The ValueAdding Intermediary
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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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Retailing (cont.)
• Nonstore Retailing
• Vending machines
• Direct-response retailing
• Mail order (or catalog marketing)
• Telemarketing
• Direct selling
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Online Shopping Agents
•
Two 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.
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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
• Viewers shop at home by phoning in or e-mailing orders
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TABLE 12.1 Top 10 Online Retailers
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Physical Distribution
• 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
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Physical Distribution (cont.)
• 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
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Physical Distribution (cont.)
• 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
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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
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The Importance of Promotion (cont.)
• Promotional Mix Tools
•
•
•
•
Advertising
Personal selling
Sales promotions
Publicity and public relations
• Promotional Mix
• The combination of promotional tools
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The Importance of Promotion (cont.)
• Matching Promotional Tools with Stages in the
Buyer Decision Process:
• Recognize the need to make a purchase
• Best tool: advertising and publicity
• Search for information about products
• Best tool: advertising and personal selling
• Compare benefits and features of competing products
• Best tool: personal selling
• Choose products that are a good value and buy them
• Best tool: sales promotion and personal selling
• Evaluate products after the purchase
• Best tool: advertising and personal selling
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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
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FIGURE 12.4 Top 10 National Advertisers
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TABLE 12.2 Media Use, Strengths, and
Weaknesses
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Personal Selling
• 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
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Sales Promotions
• 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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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
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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
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Key Terms (cont.)
electronic retailing
electronic storefront
factory outlet
fixed cost
interactive marketing
intermediary
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
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Key Terms (cont.)
pricing objectives
private warehouse
promotion
promotional mix
psychological pricing
public relations
public warehouse
publicity
retailer
sales agent
sales promotion
shopping agent (e-agent)
specialty store
supermarket
syndicated selling
telemarketing
trade show
variable cost
video marketing
warehousing
wholesale club
wholesaler
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