MARKETING MANAGEMENT 12th edition

1
MARKETING MANAGEMENT12th edition

• Chapter 14
• Developing Pricing Strategies and Programs

by Dr. Paitoon Chetthamrongchai ??. ???????
?????????? paitoon9_at_hotmail.com 081-989-0098
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Common Pricing Mistakes

• Determine costs and take traditional industry
  margins
• Failure to revise price to capitalize on market
  changes
• Setting price independently of the rest of the
  marketing mix
• Failure to vary price by product item, market
  segment, distribution channels, and purchase
  occasion

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Setting Pricing Policy
1. Selecting the pricing objective
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Step 1 Selecting the Pricing Objective

• Survival
• Maximum current profit
• Maximum market share
• Maximum market skimming
• Product-quality leadership

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Step 2 Determining Demand

• Price sensitivity
• Estimating demand curves
• Price elasticity of demand

Step 3 Estimating Costs

• Types of Costs
• Accumulated Production
• Activity-Based Cost Accounting
• Target Costing

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Types of Costs
Fixed Costs (Overhead) Costs that dont vary
with sales or production levels. Executive
Salaries Rent
Variable Costs Costs that do vary directly with
the level of production. Raw materials

• Total Costs
• Sum of the Fixed and Variable Costs for a Given
• Level of Production

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Step 5 Selecting a Pricing Method
Step 4 Analyzing competitor

• Markup pricing
• Target-return pricing
• Perceived-value pricing
• Value pricing
• Going-rate pricing
• Auction-type pricing

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Step 6 Selecting the Final Price

• Impact of other marketing activities
• Company pricing policies
• Gain-and-risk sharing pricing
• Impact of price on other parties

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Consumer Psychology and Pricing

• We often actively process price information,
  interpreting prices in terms of their knowledge
  from past purchasing experience, formal
  communications, informal communication etc.
• Reference prices
• Price-quality inferences
• Price endings 9/ 0/ 5

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Price-Adaptation Strategies

• Geographical pricing
• Discounts/allowances
• Promotional pricing
• Differentiated pricing

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Price-Adaptation Strategies

• Discounts/ Allowances
• Cash discount
• Quantity discount
• Functional discount
• Seasonal discount
• Allowance

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Promotional Pricing Tactics

• Loss-leader pricing
• Special-event pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties and service contracts
• Psychological discounting

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Discriminatory Pricing
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Increasing Prices

• Delayed quotation pricing
• Escalator clauses
• Unbundling
• Reduction of discounts

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Brand Leader Responses to Competitive Price Cuts

• Maintain price
• Maintain price and add value
• Reduce price
• Increase price and improve quality
• Launch a low-price fighter line

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MARKETING MANAGEMENT12th edition

• Chapter Designing and Managing Value Networks
  and Marketing Channels

by Dr. Paitoon Chetthamrongchai ??. ???????
?????????? paitoon9_at_hotmail.com 081-989-0098
17
What is a Value Network and Marketing-Channel
System?

• Value Network system of partnerships and
  alliances that a firm creates to source, augment,
  and deliver its offerings.
• Marketing channel sets of interdependent
  organizations involved in the process of making a
  product or service available for use or
  consumption.
• Hybrid channel multiplying the number of
  channels.
• Ex. enables its customers to do transactions in
  branch offices, over the phone, or via the
  Internet
• IBMs sales force sells to large accounts,
  outbound telemarketing sells to medium-sized
  accounts, direct mail sells to small accounts,
  retailers sell to still smaller accounts, and the
  Internet to sell specialty items

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What is a Value Network and Marketing-Channel
System?

• Channel integration characteristics
• Ability to order a product online, and pick it
  up at a convenient retail location 7-11 in Japan
• Ability to return an online-ordered product to a
  nearby store
• Right to receive discounts based on total of
  online and off-line purchases

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How a Distributor Effects an Economy of Effort
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What Work is Performed by Marketing Channels?

• Channel Functions and Flows
• Key functions include
• Gather information about potential and current
  customers, competitors, and others
• Develop and disseminate persuasive communications
  to stimulate purchasing
• Reach agreements on price and other terms so that
  transfer of ownership or possession can be
  effected
• Place orders with manufacturers

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Five Marketing Flows in the Marketing Channel
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What Work is Performed by Marketing Channels?

• Channel levels
• Zero-level channel (a.k.a. direct-marketing
  channel)
• One-level channel
• Two-level channel
• Three-level channel
• Reverse-flow channel reusing
• Service Sector Channels
• Information Highway Channels

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Consumer and Industrial Marketing Channels
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Channel-Design Decisions

• Major Channel Alternatives
• Types of Intermediaries
• Number of Intermediaries
• Exclusive distribution
• Selective distribution
• Intensive distribution

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Channel Dynamics

• Distribution channels do not stand still.
• New wholesaling and retailing institutions emerge
  
• and new channel evolve.
• Vertical Marketing Systems
• Conventional marketing channel
• Vertical marketing systems (VMS)
• Corporate and Administered VMS combines
  successive stages of production and distribution
  under single ownership.
• Contractual VMS
• Wholesaler-sponsored voluntary chains/ Retailer
  cooperatives/ Franchise organizations

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Channel Dynamics

• The New Competition in Retailing
• Horizontal Marketing Systems two or more
  unrelated companies put together resources or
  programs to exploit an emerging marketing
  opportunities.
• Multichannel Marketing Systems occurs when a
  single firm use two or more marketing channels to
  reach one or more customer segment. Ex. CP, True,
  UBC

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MARKETING MANAGEMENT12th edition

• Chapter Managing Retailing, Wholesaling, and
  Market Logistics

by Dr. Paitoon Chetthamrongchai ??. ???????
?????????? paitoon9_at_hotmail.com 01-989-0098
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Major Retailer Types
Retailing
Specialty Store Narrow product line with a deep assortment. A clothing store would be a single-line store a mens clothing store would be a limited-line store and a mens custom-shirt store would be a superspecialty store. Examples Athletes Foot, Tall Men, The Limited, The Body Shop. Department Store Several product linestypically clothing, home furnishings, and household goodswith each line operated as a separate department managed by specialist buyers or merchandisers. Examples Sears, JCPenney, Nordstrom, Bloomingdales. Supermarket Relatively large, low-cost, low-margin, high volume, self-service operation designed to serve total needs for food, laundry, and household products. Examples Kroger, Food Emporium, Jewel. Convenience Store Relatively small store located near residential area, open long hours, seven days a week, and carrying a limited line of high-turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee, soft drinks. Examples 7-Eleven, Circle K.
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Retailing

• Nonstore retailing
• Categories of nonstore retailing
• Direct selling
• Direct marketing
• Telemarketing
• Television direct-response marketing
• Electronic shopping
• Automatic vending
• Buying service
• Corporate Retailing

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Major Types of Retail Organizations
Corporate Retailing
Corporate Chain Store Two or more outlets commonly owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise. Their size allows them to buy in large quantities at lower prices, and they can afford to hire corporate specialists to deal with pricing, promotion, merchandising, inventory control, and sales forecasting. Examples Tower Records, GAP, Pottery Barn. Voluntary Chain A wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. Examples Independent Grovers Alliance (IGA), True Value Hardware, ??????? Retailer Cooperative Independent retailers who set up a central buying organization and conduct joint promotion efforts. Examples Associated Grocers, ACE Hardware. Consumer Cooperative A retail firm owned by its customers. In consumer coops residents contribute money to open their own store, vote on its policies, elect a group to manage it, and receive patronage dividends.
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Retailing

• Trends in Retailing
• New retail forms and combinations
• Growth of intertype competition
• Growth of giant retailers
• Growing investment in technology
• Global presence of major retailers
• Selling an experience, not just goods
• Competition between store-based and
  non-store-based retailing

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Wholesaling

• Wholesalers functions
• Selling and promoting
• Buying and assortment building
• Bulk breaking
• Warehousing
• Transportation
• Financing
• Risk bearing
• Market information
• Management services and counseling
• The Growth and Types of Wholesaling

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Market Logistics

• Supply chain management (SCM)
• involving procuring the right inputs, converting
  them effectively into finished products.
• Helping the company identify superior supplier
  and distributors and help them improve
  productivity, which brings down the companys
  costs.

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Market Logistics

• Market logistics
• involving planning the infrastructure to meet
  demand, then implementing and controlling the
  physical flows of materials and final goods from
  points of origin to point of use.
• Market logistic planning has four steps.
• Deciding on the companys value proposition to
  its customers
• Deciding on the best channel design and network
  strategy for reaching the customers
• Developing operational excellence in sales
  forecasting, warehouse management, transportation
  management, and materials management
• Implementing the solution with the best
  information systems, equipment, policies, and
  procedures
• Integrated logistics systems (ILS)

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Market Logistics

• Market-logistics Decisions
• Order Processing
• Warehousing
• Inventory
• Transportation

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Major Logistics Functions
Order Processing Received Processed Shipped
Costs Minimize Costs of Attaining
Logistics Objectives
Logistics Functions
Warehousing Storage Distribution
Transportation Rail, Truck, Water,
Pipeline, Air
Inventory When to order How much to
order Just-in-time
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Goals of the Logistics System

• Provide a Targeted Level of Customer Service at
  the Least Cost.
• Maximize Profits, Not Sales.

Higher Distribution Costs/ Higher Customer
Service Levels
Lower Distribution Costs/ Lower Customer Service
Levels