1. MARKETING MANAGEMENT 12 th edition C hapter 14 D eveloping P
ricing S trategies and P rograms by Dr. Paitoon Chetthamrongchai .
[email_address] 081-989-0098
2. 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
3. Setting Pricing Policy 1. Selecting the pricing objective 2.
Determining demand 3. Estimating costs 4. Analyzing competitors
costs, prices, and offers 5. Selecting a pricing method 6.
Selecting final price
4. Step 1: Selecting the Pricing Objective
Survival
Maximum current profit
Maximum market share
Maximum market skimming
Product-quality leadership
5. 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
6. Types of Costs Total Costs Sum of the Fixed and Variable
Costs for a Given Level of Production 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
7. Step 5: Selecting a Pricing Method
Markup pricing
Target-return pricing
Perceived-value pricing
Value pricing
Going-rate pricing
Auction-type pricing
Step 4: Analyzing competitor
8. 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
9. 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
10. Price-Adaptation Strategies
Geographical pricing
Discounts/allowances
Promotional pricing
Differentiated pricing
11. Price-Adaptation Strategies
Discounts/ Allowances
Cash discount
Quantity discount
Functional discount
Seasonal discount
Allowance
12. Promotional Pricing Tactics
Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service contracts
Psychological discounting
13. Discriminatory Pricing Time Product-form Customer Segment
Location
14. Increasing Prices
Delayed quotation pricing
Escalator clauses
Unbundling
Reduction of discounts
15. 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
16. MARKETING MANAGEMENT 12 th edition Chapter Designing and
Managing Value Networks and Marketing Channels by Dr. Paitoon
Chetthamrongchai . [email_address] 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
18. 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
19. How a Distributor Effects an Economy of Effort
20. 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
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
27. MARKETING MANAGEMENT 12 th edition Chapter Managing
Retailing, Wholesaling, and Market Logistics by Dr. Paitoon
Chetthamrongchai . [email_address] 01-989-0098
28. 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.
29. Retailing
Nonstore retailing
Categories of nonstore retailing
Direct selling
Direct marketing
Telemarketing
Television direct-response marketing
Electronic shopping
Automatic vending
Buying service
Corporate Retailing
30. 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.
31. 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
32. 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
33. 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.
34. 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)
35. Market Logistics
Market-logistics Decisions
Order Processing
Warehousing
Inventory
Transportation
36. Major Logistics Functions Inventory When to order How much
to order Just-in-time Costs Minimize Costs of Attaining Logistics
Objectives Warehousing Storage Distribution Order Processing
Received Processed Shipped Logistics Functions Transportation Rail,
Truck, Water, Pipeline, Air
37. 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