Pricing, Distributing, and Promoting Products

1. Pricing, Distributing, and Promoting Products

2. L E A R N I N G O B J E C T I V E S Pricing Strategy Distribution Strategy Promotion Strategy • Promotion Objectives. • Promotion Tools/Mix • Pricing objectives • Variable & Fixed Cost • Setting Prices • Break even • Distribution channel/ mix. • Non-Store Retailing

3. Pricing strategy

4. Determining Prices • Pricing to Meet Business Objectives • Pricing objectives • The goals that sellers hope to achieve in pricing products for sale. • Profit-maximizing pricing objectives • Setting prices to sell the number of units that will generate the highestprofits. • Revenues = Selling Price x Units Sold • Market share objectives • Using pricing to establish marketshare—a company’s percentage of the total industry’s sales for a specific product type.

5. Price Setting Tools • Cost-Oriented Pricing • Considers the firm’s desire to make a profit and its need to cover production costs. • Variable costs: Expense that varies with production output. E.g Raw materials, delivery cost, commissions, etc.. • Fixed costs: Costs such as insurance and utilities that must be paid regardless of the number of units produced and sold.

6. Case Study Example Assuming you own a Pizza business. Below are the monthly expenses: Selling Price = Cost + Markup = 5.95 + 4.05 = RM 10 Markup% = Markup (4.05 /10) *100% = 40.5% * 100% = Selling price

7. Case Study Cont.. • Breakeven Analysis • Analysis that determines the point at which revenue equals the cost. • Breakeven point: Number of products that must be sold to cover both fixed and variable costs. How many pizzas you need to sell at RM10 each to cover all your fixed monthly expenses? That means you must sell 1396 pizzas to break even for the month

8. Break even Analysis 3 scenarios: What happens if you sell less than 1396 pizzas in one month? What happens if you sell exactly 1396 pizzas in one month? What happens if you sell more than 1396 pizzas in one month?

9. Pricing Strategies and Tactics • Pricing Existing Products • A firm has three options for pricing existing products: • Pricing above prevailing market prices for similar products • Pricing below market prices • Pricing at or near market prices • Pricing New Products • Price skimming (cover cost) • Setting an initially high price to cover costs and generate a profit—may generate a large profit on each item sold. • Penetration pricing(gain recognition) • Setting an initially low price to establish a new product in the market.

10. Pricing Strategies and Tactics (cont.) 3. Pricing Tactics • Price lining • Products /services within a specific group are set at different price points. • Psychological pricing • Odd-even pricing: Customers prefer prices that are not stated in even amounts. • Discounts: Price reductions that stimulate sales.

11. Question Let’s say you are starting an online business selling a new product to the market. What would the product be? Which pricing strategies /tactics you would use? • Pricing Skimming • Penetration pricing • Price lining • Psychological pricing? Why?

12. Distribution MIX

13. Intermediaries and Distribution Channels • Intermediary • individual or firm that helps to distribute a product • Wholesaler • intermediary who sells products to other businesses for resale to final consumers • Retailer • intermediary who sells products directly to consumers

14. Intermediaries and Distribution Channels • Distribution Channel • network of interdependent companies through which a product passes from producer to end user • Direct Channel • distribution channel in which a product travels from producer to consumer without intermediaries

15. Channels of Distribution

16. Nonstore Retailing

17. Non-Store Retailing (cont.) Nonstore Retailing 1. Direct-response retailing(directly interact with customers to inform them of products and to receive sales orders) 2. Mail order (or catalog marketing)(buying of goods /services by mail delivery) 3. Telemarketing(using phone calls to sell. ) 4. Direct selling(door to door /home parties. )

18. Electronic Retailing • Online Shopping Agents Electronic retailingallows sellers to inform, sell to and distribute to consumers via the Web. • Electronic Storefronts (virtual storefronts) • A website from which consumers obtain information about products, place orders, and pay for purchases. • Cybermalls • Collections of virtual storefronts representing diverse products. • Interactive and Video Marketing • Allow customers to interact with the company. Video marketing allows user to shop from home.

20. Promotion strategy

21. The Importance of Promotion • Promotion • The techniques a firm uses for communicating information about products. • Promotional Objectives • To communicate information • To position products ( market segment, target) • To add value • To increase sales volume

22. The Importance of Promotion (cont.) • Matching Promotional Tools with Stages in the Buyer Decision Process: • Recognize the need to make a purchase • Best tool: advertising and publicity • Search for information about products • Best tool: advertising and personal selling • Compare benefits and features of competing products • Best tool: personal selling • Choose products that are a good value and buy them • Best tool: sales promotion and personal selling • Evaluate products after the purchase • Best tool: advertising and personal selling

23. Promotional Strategies • Promotional Tools • Advertising • Personal selling • Sales promotions • Publicity and public relations • Promotional Mix • The combination of promotional tools

24. Promotional Tools 1. Advertising • Paid, non-personal communication by which an identified sponsor informs an audience about a product. • Advertising Media • The specific communication channel/devices for carrying a seller’s message to potential customers. • Media : newspaper, magazine, TV, radio, directory, Internet, flyers, etc… • Media Mix • The combination of media through which a company advertises.

25. Media Use, Strengths, and Weaknesses

26. Promotional Tools 2. Personal Selling • A salesperson communicates one-to-one with potential customers to identify their needs and align them with the seller’s products. • Personal Selling Tasks • Order processing • Creative selling • Missionary selling(promote product & company)

27. Promotional Tools 3. Sales Promotions • Short-term promotional activities designed to encourage consumer buying, industrial sales, or cooperation from distributors • Types of Sales Promotions • Samples • Coupons/vouchers • Contests • Point-of-sale displays • Trade shows

28. Promotional Tools 4. Publicity • Information about a company, a product, or an event transmitted by the general mass media to attract public attention. • Public Relations • Company-influenced information that seeks either to build good relations with the public or to deal with unfavorable events.

29. The Promotional Mix • Promotional Mix • combination of tools used to promote a product

30. LO REVIEW Pricing Strategy Distribution Strategy Promotion Strategy • Promotion Objectives. • Promotion Tools/Mix • Pricing objectives • Variable & Fixed Cost • Setting Prices • Break even • Non-Store Retailing • Distribution channel/ mix.