Distributing, 12
chapte
r
Pricing, and
Promoting Products
Business Essentials, 8th Edition
Ebert/Griffin
Instructor
Lecture
PowerPoints
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Prentice Hall
PowerPoint Presentation prepared
by
Carol Vollmer Pope Alverno
College
L E A R N II N G O B J E C T II V E S
LEARN NG OBJECT VES
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
Copyrightifferent types of publishing as
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L E A R N II N G O B J E C T II V E S
LEARN NG OBJECT VES
((cont.)
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,
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a
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Whats in It for Me?
By understanding this chapters
methods for pricing, distributing, and
promoting products, you can benefit in
two ways:
As both employee and manager, youll be
prepared to use the concepts of pricing,
distributing, and promoting products in
your career.
As a consumer, youll have a clearer
picture of how a products promotion and
distribution affect its selling price,
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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 sharea
companys percentage of the total industrys
sales for a specific product type
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Determining Prices (cont.)
Price-Setting Tools
Cost-Oriented Pricing
Considers the firms 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 = Sellers cost + profit
Markup
Markup percentage =
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Sales price
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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
Total fixed costs
Breakeven point (in units) =
Price - Variable cost
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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 profitmay 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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Pricing Strategies and Tactics (cont.)
Fixed Versus Dynamic Pricing for EBusiness
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
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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
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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 Nonstore (cont.)
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
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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
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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 sellers 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 sellers
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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Printed in the United States of America.
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