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Unit 4.03 Price and Distribute Products

Unit 4.03 Price and Distribute Products. Unit 4 – marketing. Key terms. Price Distribution Channel of D istribution Channel M embers Retailer. Value and price. Buyers usually want to pay the lowest price possible Sellers want to charge the highest price possible

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Unit 4.03 Price and Distribute Products

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  1. Unit 4.03 Price and Distribute Products Unit 4 – marketing

  2. Key terms • Price • Distribution • Channel of Distribution • Channel Members • Retailer

  3. Value and price • Buyers usually want to pay the lowest price possible • Sellers want to charge the highest price possible • Car buying – 59% hate experience

  4. Pricing factors • Supply and Demand • Limited supply Higher price • High demand Higher price • Christmas toys

  5. Pricing factors • Uniqueness • If product has few close competitors because it is unique Higher price • Example: Hammacher Schlemmer The 20’ Animated Triceratops $350,000

  6. Pricing factors • Age • When new product first introduced Higher price • Example: • iPhone

  7. Pricing factors • Season • Prices higher just before new season • Prices lower after season ends • Example: • Holiday sales • Winter boots • Air conditioners

  8. Pricing factors • Complexity • Highly complex and technical products have higher prices than simple products • More features and options higher prices • Pros: • New and innovative • Cons • More difficult to understand • More fragile than counterparts • More breakage/recalls

  9. Price a product The money a customer must pay for a product or service • Selling Price – price paid by the customer for the product • Product Costs – costs to the manufacturer to make the product or price paid by businesses to buy the product • Operating expenses – all expenses of operating the business that are associated with the product • i.e. salaries, storage and display equipment, facilities, utilities, taxes • Profit – amount of money available after all costs and expenses have been paid

  10. Gross margin difference between the selling price and the product costs • Amount of money on hand to pay operating expenses and profitExample: • REI buys a canoe from the supplier for $200 • It costs REI $50 (prorated) to run the store (staff, insurance, electricity, etc.) • REI makes a profit of $125 on each canoe • How much is canoe sold for? • What is gross margin?

  11. Markup Amount added to the cost of a product to set the selling price • Markup = expected gross margin • Stated as a percentage of the cost or selling price • i.e. if a product costs $15 and has a 100% markup, the selling price is $30

  12. markdown A reduction from the original selling price • A pricing mistake • Reduces the amount of money the business has to cover operating expenses and profits • If customer demand is not as high as projected • If selling season is ending • If there is a flaw in the product

  13. distribution The locations and methods used to make a product or service available to the target market

  14. Need for distribution • Channel of Distribution – the route a product follows and the businesses involved in moving a product from the producer to the final consumer • Why important? • Then – exchange bushel of apples for a yard of fabric • Now – businesses specialize with mass production around world Santa’s Workshop

  15. Channel members The businesses that take part in a channel of distribution • Direct Channel of Distribution – products move from the producer straight to the consumer • Indirect Channel of Distribution – one or more other businesses between the producer and consumer • Wholesalers – intermediaries between manufacturers and retailers • Retailers – the final business organization for consumer products

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