Fourth Edition PART 4 . . . . . . . . . . . . . . . . . . . . . . . . Understanding Principles of Marketing Copyright ©2003 Prentice Hall, Inc. Chapter 11 Pricing, Promoting, and Distributing Products Copyright ©2003 Prentice Hall, Inc. 11 - 2 “If there is no price to be paid, it is also not of value” ~Albert Einstein Copyright ©2003 Prentice Hall, Inc. 11 - 3 Key Topics Pricing objectives, price-setting tools, and pricing strategies and tactics Promotion and the promotion mix Personal selling and sales promotion Channels of distribution Retailing and retail stores The physical distribution process Copyright ©2003 Prentice Hall, Inc. 11 - 4 Pricing to Meet Business Objectives Profit maximizing objectives Market share objectives Copyright ©2003 Prentice Hall, Inc. 11 - 5 Price Setting Tools Cost Oriented Pricing Markup Markup percentage Sales price Breakeven Analysis Total fixed costs Breakeven point (in units) Price - Variable cost Copyright ©2003 Prentice Hall, Inc. 11 - 6 Pricing Strategies Pricing existing products Pricing new products Price skimming Penetration pricing Pricing e-commerce products Dynamic vs. fixed Copyright ©2003 Prentice Hall, Inc. 11 - 7 Pricing Tactics Price lining Psychological pricing Odd-even pricing Discounts Copyright ©2003 Prentice Hall, Inc. 11 - 8 Promotional Objectives Communicate information Position products POSITIONING An identifiable product image in the minds of consumers Add value Control sales volume Copyright ©2003 Prentice Hall, Inc. 11 - 9 The Promotional Mix The combination of tools used to promote a product Advertising Personal Selling Sales Promotions Publicity & Public Relations Copyright ©2003 Prentice Hall, Inc. 11 - 10 Promotion and the Buyer Decision Process Stages of the Consumer Buying Process Problem (Need) Recognition Information Seeking Evaluation of Alternatives Purchase Decision Postpurchase Evaluation ADVERTISING ADVERTISING Personal Selling SALES PROMOTION ADVERTISING Publicity PERSONAL SELLING Personnel Selling Personal Selling Most Effective Promotional Tool Copyright ©2003 Prentice Hall, Inc. 11 - 11 Advertising Promotions Advertising Media Communication devices for carrying a seller’s message to potential customers Newspapers Television Direct mail Radio Magazines Outdoor Copyright ©2003 Prentice Hall, Inc. 25% 22% 18% 7% 5% 1% 11 - 12 Network Television Ad Expenditures (millions) $300 $200 $100 Copyright ©2003 Prentice Hall, Inc. $400 297 288 286 274 McDonald's Tricon Globa Restaurants DaimlerChrysler WorldCom 365 Pfizer 383 Ford Philip Morris $500 Johnson & Johnson Proctor & Gamble $900 General Motors Top 10 Network TV Advertisers $1,000 888 $800 $700 $600 621 467 365 $0 11 - 13 Internet Advertising High Potential, But With Limitations Targeted advertising is key Data Mining Data Warehousing Copyright ©2003 Prentice Hall, Inc. 11 - 14 Personal Selling One-on-One Interaction With Potential Buyers Telemarketing Using the telephone to perform personal selling Order Processing Creative Selling Missionary Selling Copyright ©2003 Prentice Hall, Inc. 11 - 15 Sales Promotions Short-term Promotional Activity Goal: To stimulate consumer buying or cooperation from distributors and sales agents Coupons Point-of-purchase displays Premiums Trade shows 50% OFF Contests Samples Copyright ©2003 Prentice Hall, Inc. 11 - 16 Publicity and Public Relations Publicity When information about a company or product is communicated to the public via mass media PRO CON Free to the company The company has no control Public Relations Company-influenced publicity Copyright ©2003 Prentice Hall, Inc. 11 - 17 Distribution Terms Distribution Channel Distribution Mix Intermediary Wholesaler Retailer Agent/broker Copyright ©2003 Prentice Hall, Inc. 11 - 18 Channels of Distribution Producer Agent/Broker Wholesaler Retailer Users Channel 1 Consumer Channel 2 Consumer Channel 3 Consumer Channel 4 Consumer Channel 5 Consumer/ Business Channel 6 Business Channel 7 Business Channel 8 Business Copyright ©2003 Prentice Hall, Inc. Consumer Channels Consumer/ Business Channel Business Channels 11 - 19 Wholesaling E-intermediaries Merchant Wholesaler Copyright ©2003 Prentice Hall, Inc. Syndicated Sellers Shopping Agents Business-to-Business Brokers 11 - 20 Retailing Product Line Retailers Department stores Bargain Retailers Discount houses Supermarkets Catalog showrooms Specialty stores Factory outlets Warehouse clubs Convenience stores Copyright ©2003 Prentice Hall, Inc. 11 - 21 Nonstore and Electronic Retailing Direct Response Retailing Mail order (or catalog marketing) Telemarketing Direct selling Electronic Retailing Electronic storefront E-catalogs Interactive marketing Copyright ©2003 Prentice Hall, Inc. 11 - 22 Physical Distribution Warehousing Operations Public and private warehouses Transportation Operations Modes E-customer satisfaction Distribution can be a competitive advantage! Copyright ©2003 Prentice Hall, Inc. 11 - 23 Chapter Review Identify pricing objectives, strategies, and tactics Discuss promotional objectives, the promotional mix, and advertising media Describe personal selling and the various types of sales promotions Identify the channels of distribution and the differences between merchant wholesalers and agents/brokers Copyright ©2003 Prentice Hall, Inc. 11 - 24 Chapter Review Identify the different types of retailing and retail stores Describe the major activities in the physical distribution process Copyright ©2003 Prentice Hall, Inc. 11 - 25