Chapter 11 Pricing Strategies 2z1x6s

Chapter 11 PRICING STRATEGIES : ADDITIONAL CONSIDERATIONS

New-Product Pricing Strategy 1. Market-skimming pricing (price skimming) setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. 2. Market-penetration pricing setting a low price for a new product in order to attract a large number of buyers and a large market share.

Product Mix Pricing Strategy 1. Product Line PricingSetting the price steps between various products in a product line based on cost differences between the products, customer avaluations of different features, and competitors' prices. 2. optimal-product pricing the pricing of optional or accessory products along with a main product. 3. Captive-Product Pricing Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console. 4. By-Product Pricing Setting a price for by-products in order to make the main product's price more competitive. 5. Product Bundle Pricing Combining several products and offering the bundle at a reduced price.

Price Adjustment Strategies Discount a straight reduction in price on purchase during a stated period of time or in larger quantities. Allowence promotional money paid by manufactures to retailer in return for an agreement to feature the manufacture's products in some way. 1. Segmented Pricing Selling a product or service at two or more prices, where the difference in prices is not based on difference in cost. 2. Psychological Pricing Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product. Reference price price that buyers carry in their minds and refer to when they look at a given product.

3. Promotional Pricing Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales. 4. Geographical Pricing Getting price for customer located in different parts of the country or world. FOB-origin pricing a geographical pricing strategy in which goods are placed free on board carrier; the customer pays the freight from the factory to the destination. Uniform-deliverd pricing a geographical pricing strategy in which the company charge the same price plus freight to all customer, regardless of their location. Zone pricing a geographical pricing strategy in which the company sets up two or more zones. all customer within a zone pay the same total price; the more distance the zone, the higher the price. Basing-point pricing a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer. Freight-absorption pricing a geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business. 5. Dynamic Pricing Adjusting prices continually to meet the characteristics and needs of individual customer and situation.

Price Changes When a firm considers initiating a price change, it must consider customers’ and competitors’ reaction. There are different implication to initiating price cuts and initiating price increases. Buyer reactions to price changes are influnced by the meaning customers see in the price change. Competitors’ reactions flow from a set reaction policy or fresh analysis of each situation. There are also many factors consider in responding to a competitor’s price changes. The company that faces a price change initiated by a competitor must try to understand the competitor’s intent as well as likely duration and impact of the change. If a swift reaction is desirable, the firm should preplan its reactions to different possible price action by competitors. When facing a competitor’s price change, the company might sit tight, reduce its own price, raise perceived quality, improve quality and raise price, or launch a fighter brand. Many federal, state, and even local laws govern the rules of fair pricing. Also, company must consider broader societal pricing concern. The major public policy issues in pricing include potentially damaging pricing practice within a given level of the channel, such as price-fixing and predatory pricing. Treating customer fairly is an important part of building strong and lasting customer relationships.

Chapter 12 MARKETING CHANNELS : DELIVERING CUSTOMER VALUE

Supply Chains and the Value Delivery Network Producing a product or service and making it available to buyers requires building relationships not only in customers but also with key suppliers and resellers in the company’s supply chain. Value delivery network is a network composed of the company, suppliers, distributors, and ultimately, customers who partner with each other to improve the performance on the entire system in delivering the customer value.

The Nature and Importance of Marketing Channels Marketing channel ( or distribution channel) is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business . A company’s channel decisions directly affect every other marketing decision. Pricing depends on whether the company works with national discount chains, -high quality specially stores, or sells directly to consumers online.

How Channel Add Value? In making products and services available to consumers, channel add value by bridging the major time, place, and possession gaps that separate goods and services from those who use them. of the marketing channel perform many key function. Some help to complete transactions :     

Information: Gathering and distributing information about consumers, producers, and other actors and forces in the marketing environment needed to planning and aiding exchange. Promotion: Developing and spreading persuasive communications about an offer. : Finding and communicating with prospective buyers. Matching: Shapping offers to meet the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging. Negotiation: Reaching and agreement on price and other so that ownership or possession can be transferred.

Others help to fulfill the completed transaction :   

Physical distribution: Transporting and storing goods. Financing: Acquiring and using funds to cover the costs of the channel work. Risk Taking: Assuming the risks of carrying out the channel work.

Number of Channel Levels Channel level a layer of intermediaries that performs some works in bringing the product and its ownership closer to the final buyer. Direct marketing channel a marketing channel that has no intermediary levels. Indirect marketing channel a marketing channel containing one or more intermediary levels.

Channel Behavior and Organization Channel Behavior Channel conflict disagreements among marketing channel member on goals, roles, and reward-who should do what and for what rewards.

Vertical Marketing System Conventional distribution channel a channel consisting of one or more independent producers, wholesalers and retailers, each a seperate business seeking to maximize its own profit, perhaps even at the expense of profits for the system as a whole. Vertical marketing system (VMS) a channel structure in which producers, wholessalers, and retailers act as a unified system.

Multichannel Distribution System Multichannel distribution system is A distribution system in which a single firms set up two or more marketing channels to reach one or more customer segments. Multichannel distribution system offer many adventages to companies facing large and complex markets.

Channel Design Decision Marketing channel design is Deg effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives.

Channel Management Decision Once the company has reviewed its channel alternatives and determined the best channel design, it must implement and manage the chosen channel. Marketing channel management calls for Selecting, managing, and motivating individual channel and evaluating their performance over time.

Marketing Logistic and Supply Chain Management Marketing Logistic is an area of potentially high cost savings and improved customer satisfaction. The major logistic functions are warehousing, inventory management, transportation, and logistic information management.

Chapter 13 RETAILING AND WHOLESALING

Retailing Retailing includes all the activities involved in selling goods or service directly to final consumers for their personal, nonbusiness use. Retailers play an important role in connecting brands to consumers in the final phases of buying process. Shopper marketing involves focusing the entire marketing process on turning shoppers into buyers at the point of sale, whether it’s in store, online, or mobile shopping. Retail stores come in all shapes and sizes, and new retail types keep emerging. Store retailers can be classified by the amount of service they provide (self-service, limited service), product line sold (specialty stores, department stores, supermarkets, convenience stores, superstores, and service businesses), and relative prices (discount stores and off-price retailers). Today, many retailers are banding together in corporate and contractual retail organizations ( corporate chains, voluntary chains, retailer cooperatives, and franchise organizations).

Retailer Marketing Decisions Retailers are always searching for new marketing strategies to attract and hold customers. They face major marketing decisions about segmentation and targeting, store differentiation and positioning, and retail marketing mix. Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets. Those that try to offer “something for everyone” end up satisfying no market well. By contrast, successful retailers define their target markets well and position themselves strongly. Guided by strong targeting and positioning, retailers must decide on a retailmarketing mixproduct and services assortment, price, promotion, and place. A retailer’s price policy must fit its target market and positioning, product and services assortment, and competition. Retailers use any or all if the five promotion tools-advertising, personal selling, sales promotion, PR, and direct marketing-to reach consumers. Finally, its very important that retailers select locations that are acces market in areas that are consistent with the retailer’s positioning.

Retailing Trends and Developments Retailers operate in a harsh and fast-changing environment, which offers threats as well as opportunities. Following years of goods economic times for retailers, the Great recession turned many retailers’ fortunes from boom to bust. New retail forms continue to emerge. At the same time, however, different types of retailers are increasingly serving similar customers with the same products and prices ( retail convergence), making differentiation more difficult. Other trends in retailing include the rise of megaretailers, the rapid growth of direct and online retailing, and the global expansion of major retailers.

Wholesaling Wholesaling includes all the activities involved in selling goods or services to those who are buying for the purpose to resale or business use. Wholesalers fall into three groups. First, Merchant wholesalers take the possession of the goods. They include full-service wholesalers ( wholesale merchants and industrial distributors) and limited-service wholesalers (cash-and-carry wholesalers, truck wholesalers, drop shippers, rack jobbers, producers’ cooperatives, and mail-order wholesalers). Second, brokers and agents do not take possession of the goods but are paid a commission for aiding companies in buying and selling. Finally, manufacturers’ sales branches and offices are wholesaling operations conducted by non-wholesalers to by the wholesalers. Like retailers, wholesalers must target carefully and position themselves strongly. And, like retailers, wholesalers must decide on product and service assortments, prices, promotion, and place. Progressive wholesalers constantly watch for better ways to meet the changing needs of their suppliers and target customers. They recognize that, in the long run, their only reason for existence comes for adding value, which occurs by increasing the efficiency and effectiveness of the entire marketing channel. As with other types of marketers, the goal is to build value-adding customer relationship.

Chapter 14 COMMUNICATING CUSTOMER VALUE: INTEGRATED MARKETING COMMUNICATIONS STRATEGY

The Promotion Mix A company’s total promotion mix-also called its marketing communications mix-consist of the spesific blend of : 1) Advertising any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. 2) Sales Promotion short-term incentives to encourage the purchase or sale of a product or service. 3) Personal Selling personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships. 4) Public Relations building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or head ing off unfavorable rumors, stories, and events. 5) Direct Marketing direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customers relationships.

Integrated Marketing Communications The explosive developments in communications technology and changes marketer and customer communication strategies have had a dramatic impact on marketing communications. rs are now adding a broad selection of more-specialized and highly targeted mediaincluding digital and online media-to reach smaller customer segments with more-personalized, interactive messages. As they adopt richer but more fragmented media and promotion mixed to reach their diverse markets, they risk creating a communications hodgepodge for consumers. To prevent this, companies are adopting the concept of integrated marketing communications(IMC). Guided by an overall IMC strategy, the company works out the roles that the various promotional tools will play and the extent to which each will be used. It carefully coordinates the promotional activities and the timing of when major campaigns take place.

Outline the Communication Process and The Steps in Developing Effective Marketing Communications The communication process involves nine elements: 

Two major parties : 1) Sender the party sending the message to another party. 2) Receiver the party receiving the message sent by another party.





Two communication tools: 3) Message the set of symbols that the sender transmits. 4) Media the communication channel through which the message moves from the sender to the receiver. Four communication functions: 5) Decoding the process by which the receiver assigns meaning to the symbols encoded by the sender 6) Encoding the process of putting thought into symbolic form. 7) Response the reactions of the receiver after being exposed to the message. 8) the part of the receiver’s response communicated back to the sender. 9) Noise the unplanned static or distortion during the communication process, which results in the receiver getting a different message than the one the sender sent.

Methods for Setting The Promotion Budget and Factors That Affect The Design Of The Promotion Mix The company must determine how to spend the promotion. The most popular approaches are to spend what the company can afford, use a percentage of sales, base promotion on competitor’s spending, or base it on analysis and costing of the communication objectives and tasks. The company has to divide the promotion budget among the major tools to create the promotion mix. Companies can pursue a push or a pull promotional strategy- or a combination of the two. To best specific blend of promotion tools depends on the type of product/market, the buyer’s readliness stage, and the PLC stage. People at all levels of the organization must be aware of the many legal and ethical issues surrounding marketing communications. Companies must work hard and proactively at communicating openly, honestly, and agreeably with their customers and resellers.

Chapter 15 ADVERTISING AND PUBLIC RELATIONS

Advertising Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertising-the used of paid media by a seller to inform, persuade, and remind buyers about its product or its organization-is an important promotion tool for communicating the value that marketers create for their customers. Advertising takes many forms and has many uses. Althought advertising is employed mostly by business firms, a wide range of notfor-profit organizations, professionals, and social agencies also employ advertising to promote their causes to various target publics. PR-gaining favorable publicity and and creating favorable company image- is the least used of the major promotion tools, although it has great potential for building consumer awareness and preference.

The Major Decision Involved in Developing Advertising Program Advertising decision making decisions about the advertising objectives, budget, message, and media, and finally culminates with an evaluation of the results. r should set clear target, task, and timing objectives, whether the aim is to inform, persuade, or remind buyers. Advertising strategy consist of two major elements : Creating advertising messages and selecting advertising media. The message decision calls for planning a message strategy and executing it effectively. Good messages are especially important in today’s costly and cluttured advertising environment. Just to gain and hold attaention, today’s message must be better planned, more imaginative, more entertaining, more rewarding to consumers. In fact, many many marketers are now subscribing to a new merging of advertising and entertainment, dubbed Madison & Vine. The media decision involves defining reach, frequency, and impact goals; choosing major media types; selecting media vehicles; and choosing media timing. Message and media decisions must be closely coordinated for maximum campaign effectiveness. Finally, evaluation calls for evaluating the communication and sales effects of advertising before, during, and after ads are placed. Advertising ability has become a hot issue for most companies.

Define the Role of PR in the Promotion Mix PR-gaining favorable publicity and creating a favorable company image-is the least used of the major promotion tools, although it has great potential for building consumer awareness and preference. PR is used to promote products, people, places, ideas, activities, organizations, and even nations. Companies use PR to build good relationships with consumers, investors, the media, and their communities. PR can have a strong impact on public awareness at a much lower cost than advertising can, and PR results can sometimes be spectacular.

Although PR still captures only a small portion of the overall marketing budgets of most firms, it is playing an increasingly important brand-building role. In the digital age, the lines between advertising and PR are becoming more and more blurred.

How Companies use PR to communicate with their? Companies use PR to communicate with their publics by setting PR objectives, choosing PR messages and vehicles, implementing the PR plan, and evaluating PR results. To accomplish these goals, PR professionals use several tools, such as news, speeches, and special events. They also prepare written, audiovisual, and corporate identity materials and contribute money and time to public service activities. The web has also become an increasingly important PR channel, as web sites, blogs, and social networks are providing interesting new ways to reach more people.