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Chapter 13: DISTRIBUTION AND PRICING

Chapter 13: DISTRIBUTION AND PRICING. Right Product, Right Person, Right Place, Right Price. GETTING PRODUCTS TO THE RIGHT PLACE. Distribution is a key element of the marketing mix Where should the product be sold? How will it get to the location(s) from the factory?.

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Chapter 13: DISTRIBUTION AND PRICING

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  1. Chapter 13: DISTRIBUTION AND PRICING Right Product, Right Person, Right Place, Right Price

  2. GETTING PRODUCTS TO THE RIGHT PLACE • Distribution is a key element of the marketing mix • Where should the product be sold? • How will it get to the location(s) from the factory?

  3. DISTRIBUTION: GETTING YOUR PRODUCT TO YOUR CUSTOMER Producer Wholesaler Consumer Channel of Distribution – the path that a product takes from the producer to the consumer

  4. CHANNEL INTERMEDIARIES Channel Intermediaries – informally called middlemen. They facilitate the movement of products from the producer to the consumer.

  5. DISTRIBUTING DIRECTLY TO THE CONSUMER Producer Consumer Direct Channel – Distribution process that links the producer and the customer with no intermediaries.

  6. THE ROLE OF DISTRIBUTORS: ADDING VALUE (utility)

  7. DISTRIBUTORS: STREAMLINING CONSUMER TRANSACTIONS

  8. STRATEGIC DISTRIBUTION “ Reed Hastings created Netflix – which revolutionized video distribution – partly out of anger that Blockbuster charged him $40 in late fees for a single overdue rental of Apollo 13. “

  9. THE MEMBERS OF THE CHANNEL Retailers – the distributors that sell products directly to the ultimate users Wholesalers – distributors that buy products from producers and sell them to other businesses or nonfinal users.

  10. WHOLESALERS: SORTING OUT THE OPTIONS • Merchant Wholesalers • Full-service • Limited Service • Drop Shippers • Cash and Carry • Truck Jobbers

  11. Store Retailers Non-Store Retailers Online Direct Response Direct Selling Vending RETAILERS: THE CONSUMER CONNECTION

  12. DISTRIBUTION STRATEGY INTENSIVE DISTRIBUTION SELECTIVE DISTRIBUTION EXCLUSIVE DISTRIBUTION

  13. MULTICHANNEL RETAILING • Retailers are encouraging consumers to buy through multiple channels Store Online

  14. STORE RETAILERS

  15. PHYSICAL DISTRIBUTION: PLANES, TRAINS, AND MUCH, MUCH MORE Supply Chain Management – planning and coordinating the movement of products along the supply chain. Logistics - focuses on the tactics involved in moving the products.

  16. ELEMENTS OF THE SUPPLY CHAIN

  17. SUPPLY CHAIN MANAGEMENT DECISIONS • Warehousing • Materials Handling • Inventory Control • Order Processing • Customer Service • Transportation • Security

  18. DISTRIBUTING TO THE BIG BOX RETAILERS A typical Wal-Mart distribution center is more than one million square feet, or the equivalent of 10 Wal-Mart retail stores. www.walmartfacts.com/wal-mart-distribution-centers.aspx

  19. MODES OF TRANSPORTATION

  20. PRICING : A HIGH STAKES GAME • Pricing plays a key role in the demand for products • Price is a tough variable • Legal constraints • Intermediary pricing • Stable pricing is not the norm • Prices must constantly be evaluated

  21. Building Profitability Matching the Competition Creating Prestige Skimming Pricing Boosting Volume Penetration Pricing Every-day-low Pricing High/Low Pricing Loss Leader Pricing PRICING OBJECTIVES AND STRATEGIES

  22. “SLIPPERY FINGER” ONLINE PRICING GOOFS • Free flights from Los Angeles to Fiji. • Round-trip tickets from San Jose, California, to Paris for $27.98. • $1,049 televisions wrongly listed for $99.99 on Amazon. • $588 Hitachi monitors mistakenly priced at $164. • $379 Axim X3i PDAs wrongly priced at $79 on Dell’s site.

  23. PRICING IN PRACTICE: A REAL WORLD APPROACH Breakeven Point (BP) = Total fixed cost (FC) Price/Unit (P) – Variable cost/unit (VC) Breakeven analysis – the process of determining the number of units that must be sold to cover costs.

  24. USING BREAKEVEN ANALYSIS Businesses make decisions to adjust the product price and/or costs. • Raise prices • Decrease variable costs • Decrease fixed costs

  25. FIXED MARGIN PRICING • Cost-Based Pricing • Demand-Based Pricing Profit Margin – the gap between cost and the price per product.

  26. CONSUMER PRICING PERCEPTIONS: THE STRATEGIC WILD CARD • Consumer price perceptions can defy logic! • The link between price and perceived quality can be powerful • Consumers will use price as a quality indicator • Does odd pricing like $196 or $199 always mean a bargain?

  27. PSYCHOLOGICAL PRICING A recent survey of 1,200 prices, found that 57% ended in .99 cents, and another 11% ended in .97 or .98 cents. Only about 3% were whole dollar amounts.

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