MarketingConcern the philosophy we should analyze the needs of our Customers and then make decisions to satisfy those needs better than our competitors.

Adam Smith – 1776 Wealth of NationsWe went a lot far since that time ……

Abstract

Those notes just attempts to set a frame-work to give direction to our manegers.

To better understand the marketing concept and capitalize our half century in business, it is whort to analize its evolution during different historical time frames.

One of the four major elements of the Marketing Mix is Price.

Pricing is an important strategic issue beeing related to product’ positioning, product’ features, channel decision, promotion and, not least, company finance.

The aim is to light out themes and questions finalized to became institutional INMAN’ corporate practice.

Determine Pricing

Price Stabilization(Status Quo)

PenetrationRevenue

Maximization

SkimmingProfit Maximization

Set PricingObjectives

EnvironmentalFactors

Fixed + VariableCosts associated to

the ProductCalculate Costs

Try to understandhow demand varies

with priceEstimate

Price

Promotional Tactics

Place of Distribution

Product

Marketing Mix

Positioning

Targeting

Segmentation

Marketing Analysis

Develop

PRICING STRATEGY

MARKETING

Open Order

Cash & Early Payment

Trade Discount

Quantity Over time

Quantity

Define "List Price"Discount

Develop PricingStructure

Psychological

Value-based

Target return

Cost-Plus

Pricing Method

PRODUCTIONCONCEPT

SALES CONCEPT

MARKETINGCONCEPT

Evolution

Production Concept

The Production Concept prevailed in an early stage of the Company. We were focused on the capacity to produce efficiently at low cost and for this reason itself create the demand for the products.The key questions where:

- Can we produce the product ? - Can we produce enough of it ?

It worked fairly well because the goods produced were those of basic necessity and there was a high level of unfulfilled demand.Virtually everything that could be produced was sold easily by sales team whose job was simply to execute transaction at a price determined by the cost of production.

Sales Concept

In a second stage, Mass Production had become a commonplace, Competition had increased, and there was little unfulfilled demand.Company evolved to a Sales Concept under which, not only would produce the products but also would try to convince Customer to buy them through advertising and personal selling. The key questions were :

- Can we sell The Product ?- Can we charge enough for it ?

The goal simply was to beat the competition to the sale with little regard to Customer Satisfaction.Marketing was a function performed after the product was developed and produced and confused with hard selling. We still abuse of the word "Marketing“ when we really mean Sales.

Marketing Concept

In a third stage the variety of product increased and selling no longer can be relied upon to generate sales.With increased discretionary income, customer could afford to be selective and buy those product that precisely meet their changing needs, and this needs were, and are not immediately obvious.The key questions became :

- What do Customer Want ?- Can we develop it While they still want it ?- How we can keep our Customer Satisfy ?

Marketing Concept

In response to the discerning Customers, firm begun to adopt a more evolut Marketing Concept,

Which involves :

- Focusing on customer need before developing the product.

- Aligning all functions of the company to focus on those needs.

- Realizing a profit by successfully satisfy Customer needs over the long-term.

Marketing Concept

When companies first begun to adopt the concept they typically set up separate marketing departments with the objective to satisfy Customer needs; often they were just sales departments with expanded responsibilities. More and more the most advanced firms have structured themselves into marketing organization having a company-wide Costumer focus.

Since the entire organization exist to satisfy Customer needs, nobody can neglect a Customer issue by declaring “ It's a Marketing Problem " - everybody must be concerned with Customer Satisfaction.The Marketing Concept relies upon marketing research to define market segments, their size and their needs.

To satisfy those needs, the Marketing Team makes decisions about the controllable parameters of what’s called ‘’Marketing Mix’’.

Pricing Strategy

Activities : I. Develop Marketing Analysis

II. Set Marketing Mix

III. Estimate Demand

IV. Calculate Costs

V. Enviromental Factors

VI. Set Pricing Objectives

Pricing Strategy

I. Market Analysis

i. Sectorzation

ii. Segmentation

iii. Targetting

iv. Positioning

Picing Strategy - Marketing Mix -

II. Marketing Mix

Define :

i. Product

ii. Place of distribution

iii. Price- Price Strategy- Price Demand

Pricing Strategy - Marketing Mix -

i. Product

Associated Decisions :

• Brand Name

• Functionality

• Styling

• Quality

• Packaging

• Repair & Support

• Warranty

• Accesories & Service

Pricing Strategy - Marketing Mix -

ii. Place of Distribution

Associated Decisions :

• Market Coverage Target

Inclusive – Selective – Exclusive

• Distribution Channel

• Specific Channel Members

• Warehousing

• Repair &

Support• Localisation of

non strategic Product’ process stages

• Order pocessing

• Transportation

Pricing Strategy - Marketing Mix -

iii. Price :

- Strategy

Decisioni Associate :

• TargetSkim - Penetration – Mantaining

• Retail PriceSuggested – Imposed

• DiscountVolume – Cumulative Volume - Cash & early Payments

• Bundling /Package

• Price Flexibility

• Price Discrimination

OEM – End Users

Pricing Strategy - Marketing Mix -

iii. Price :- Demand

Esimate DemandTry to understand how demand varies on Price variation

Valuate and Estimate :

• Demand Curve * see theory

• Price Elasticy of Demand * see theory

• The Experience Curve * see theory

• Product ife Cycle Curve* see Theory

Pricing Strategy

IV. Calculate Costs

Before launching a product, there likely is at least a basic understand of the costs involved, othewise there might be no profit to be made.

The Unit costs of the product set the lower limit to be charged, and determine the profit margin at higher prices.

The total unit costs of producing a product is composed of the Variable cost of producing any additional unit and Fixed costs regardless the quantity produced.

The Pricing Policy has to consider both types of Costs.

Pricing Strategy

V. Enviromental Factors

To be considered :

• Implication of our prycing on competitors’ pricing decisions.

Too low = Price War Too hight = Attract more Competitors

• Legal Implication* It is not our main issue but to be considered in iternational trade :

- A company is not free to price its ‘’Product’’ at any level it choses as offering different price to different costumer may violate internatinal fiscal laws, ‘’Tranfer Price’’.

- Pricing too low may be cosidered a predatory pricing or ‘’dumping’’ in the case of international trade.

- Collusion with Competitor s to fix prices at an agreed level is illegal in many Countries

Picing Strategy

VI. Pricing Objectives

Settings :

• Current Profit MaximizationMaximize current profit, taking into account just revenue and costs may result in lower long-term profits.

• Current Revenue Maximization

Maximize current revenue with no regard to profit margin has a sense to maximise long-term profit by increasing Market Shares and Lowerig Costs

• Maximize QuantityMaximize the units sold or the number of Customer served has a sense in order to decrease long-terms costs as predicted by the Experience Curve

• Maximise Profit MarginAttempts to maximize the unit profit margin, recognizing that quantities will be low .

Picing Strategy

VI.Pricing Objectives

Settings :

• Quality LeadershipUse Price to signal high Quality in an attempt to position the Product/Brand as Quality Leader

• Partial Cost RecoveryAn organization that has other revenue sources may seek only partial cost recovery

• SurvivalIn situation of Market Decline and Overcapacity, a temporary goal may be to select a price that will cover costs and permit the company to remain in the market

• Status QuoThe company may seek price stabilization in order to avoid price wars and maintain a moderate but stable level of profit

Determine Pricing

VI.a Pricing Method

• Cost Plus Set the price at the production costs plus a certain profit margin.

• Target ReturnSet a price to achieve a target return-on-investment.

• Value BasedBase the price on the effective value to the Customer relative to alternative products.

• PsichologicalBase the price on factor such as signals of product quality, popular price points, and what Customer perceives to be fair.

Determine Pricing

VI.a Pricing Discount

• Quantity

Discounts is to be defined for Customers who purchase large quantities on scale economy base.

• Quantity Over-TimeDiscounts may be offered to Customers who purchase large quantities over time but cannot, or do not wish, to place large individual Orders. A Control must be performed regularly overtime on quantity/discount alignment.

• Open OrdersDiscounts can be analized and approved by upper sales dpt level.

• Trade DiscountA functional discount offered to distribution channel members for performing they roles.

• Casch & Ealy PaimentsExtended to Customer who pay their bill before a certain term. Could be extended to Customers who demonstrate a substantial respect of payment terms on a rating base assigned by Account dpt.

Determine Pricing

Using the informations on the above steps we have the opportunity to design

Corporate Pricing Models

to better meet the needs either of the Company, of its Market and of the Istitutions that rule it.

• Chose Method of Pricing

• Develop Structure of Pricing

• Determine Discounts of Pricing

Set

Price Iists