Session #4 Pricing & Marketing Distribution Channels Marketing Management Session #4 Pricing & Marketing Distribution Channels Ice Breaking and Trainer Introduce Himself

Pricing Strategy

The amount of money charged for a product or service Generally price is.. The amount of money charged for a product or service So how are Prices Set ???

Historically… Prices were usually set by buyers and sellers bargaining with each other. BUT NOW ...

Price setting is based on… Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) Pricing Decisions

Internal Factors: Objectives Survival Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business. Current Profit Maximization Choose the Price that Produces the Maximum Current Profit, Etc. Marketing Objectives Market Share Leadership Low as Possible Prices to Become the Market Share Leader. Product Quality Leadership High Prices to Cover Higher Performance Quality and R & D.

Internal Factors: Marketing Mix Product Design Nonprice Positions Price Distribution Promotion 7

Internal Factors: Costs Costs set the floor for the price. Price should covers costs for producing, distributing and selling the product, and provides a good profit. Cost based pricing 8

Internal Factors: Organization Consd. Costs/Revenue TR TC VC FC Output/Sales 9

Price setting is based on… Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) Pricing Decisions 10

External Factors: Demand vs. Supply (1) 11

External Factors: Demand vs. Supply (2) 12

Price setting is based on… Internal Factors 1. Marketing objectives 2. Marketing mix strategy 3. Costs 4. Organizational considerations External Factors 1. Nature of the market and demand 2. Competition 3. Other environmental factors (economy, resellers, government) Pricing Decisions 13

Think about it… VALUE ??? PRICE??

Case Study: Iron Industry Production of 1 ton costs: L.E 1,500 Transportation costs: L.E 200 Handling costs: L.E 300 Market price: L.E 3,500 Demand >> Supply Profit maximization strategy Monopoly Price control from the government 15

Pricing Approaches

General Pricing Approaches Cost-Based Pricing Value-Based Pricing Competition-Based Pricing

Product Customer Cost-Based Pricing Value-Based Pricing Cost Value Price Price Value Cost Customers Product

Competition-Based Pricing

New-Product Pricing Strategies Market-Skimming Pricing : Intel is a prime user of this strategy.

New-Product Pricing Strategies 2. Market-Penetration Pricing : Dell uses penetration pricing to sell computers.

Marketing Distribution Channels

“Distribution Channel" can be defined as "all the routes through which a product can pass between its point of production and consumption"

Marketing Channel Functions Physical distribution Transporting and storing goods Financing Acquiring and using funds to cover the costs of the distribution channel Risk taking Assuming some commercial risks by operating the channel (e.g. holding stock) Information Gathering market research data- important for marketing planning Matching Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging Negotiation Reaching agreement on price and other terms of the offer

Number of Channel Levels Producer Consumer Producer Retailer Consumer Producer Wholesaler Consumer Retailer

Channel 1 Called a direct-marketing channel Has no intermediary levels It consists of a manufacturer selling directly to consumers Producer Consumer

Channel 2 Contains one intermediary level. Producer Retailer Consumer Contains one intermediary level. In consumer markets, this level is typically a retailer. For example, the makers of televisions, cameras, furniture, major appliances and many other products sell their goods directly to large retailers, which then sell the goods to final consumers.

Channel 3 Producer Wholesaler Retailer Consumer Contains two intermediary levels , a wholesaler and retailer. This channel is often used by manufacturers of food, drugs, hardware and other products

Different forms of distribution channels Franchise Agent

How to choose the distribution channel ??

Characteristics of intermediaries You must consider: Company Plan Marketing strategy Financial situation The number of its outlets Choice of its transportation method Characteristics of intermediaries Their abilities to handle promotion, customer contact, storage and credit Ability to deliver the product with required Quality Competitors' channels Better be similar to competitors channels Using the same channel expected by the customers

Integrated Marketing Communication

Marketing Communications The means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell.

Communications Environment Market Fragmentation Led to Media Fragmentation Marketers Have Shifted Away From Mass Marketing Less Broadcasting Two Factors are Changing the Face of Today’s Marketing Communications: Improvements in Information Technology Has Led to Segmented Marketing More Narrowcasting

Integrated Marketing Communications With Integrated Marketing Communications (IMC), the Company Carefully Integrates and Coordinates Its Many Communications Channels to Deliver a Clear, Consistent, and Compelling Message About the Organization and Its Product or Service.

IMC Builds Brands

Communication Platforms (1) Advertising Print and broadcast ads Packaging inserts Motion pictures Brochures and booklets Posters Billboards Logos Videotapes Sales Promotion Contests, games Sampling Trade shows Coupons Extra quantity Gifts

Communication Platforms (2) Events/ Experiences Sports Festivals Arts Causes Factory tours Street activities Public Relations Press kits Speeches Seminars Annual reports Charitable donations Publications Community relations

Communication Platforms (3) Personal Selling Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows Direct Marketing Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail E-mail Voice mail

Elements in the Communications Process

Designing the Communications Message strategy Creative strategy Message source Personal communication channels Nonpersonal communication channels Integration

Setting the Promotion Mix Advertising Reach Many Buyers, Repeat Message Many Times, Impersonal, Expensive Personal Selling Personal Interaction, Relationship Building, Most Expensive Promo Tool Sales Promotion Wide Variety of Tools, Rewards Quick Response, Efforts Short-Lived Public Relations Very Believable, Dramatize a Company or Product Direct Marketing Nonpublic, Immediate, Customized, Interactive

Questions