Business Essentials, 7 th Edition Ebert/Griffin

1. Business Essentials, 7th EditionEbert/Griffin Pricing, Distributing and Promoting Products Instructor Lecture PowerPoints PowerPoint Presentation prepared by Carol Vollmer Pope Alverno College © 2009 Pearson Education, Inc.

2. 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 highest possible total profits • Revenues = Selling Price x Units Sold • Market share objectives • Using pricing to establish market share—a company’s percentage of the total industry’s sales for a specific product type © 2009 Pearson Education, Inc.

3. Determining Prices (cont’d) • Price-Setting Tools • Cost-Oriented Pricing • Considers the firm’s desire to make a profit and its need to cover production costs • Variable costs: Costs that change with the number of units of a product produced and sold • Fixed costs: Costs such as insurance and utilities that must be paid regardless of the number of units produced and sold • Selling price = Seller’s cost + profit © 2009 Pearson Education, Inc.

4. Determining Prices (cont’d) • Breakeven Analysis • Shows, at any selling price, the amount of loss or profit for each possible volume of sales • Breakeven point: Number of products that must be sold so total revenues exactly cover both fixed and variable costs © 2009 Pearson Education, Inc.

5. FIGURE 12.1 Breakeven Analysis © 2009 Pearson Education, Inc.

6. 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 • Setting an initially high price to cover costs and generate a profit—may generate a large profit on each item sold • Penetration pricing • Setting an initially low price to establish a new product in the market © 2009 Pearson Education, Inc.

7. Pricing Strategies and Tactics (cont’d) • Fixed Versus Dynamic Pricing for E-Business • To attract sales that might be lost under traditional fixed-price structures, sellers alter prices privately, on a one-to-one, customer-to-customer basis • At present, fixed pricing is still the most common option for cybershoppers © 2009 Pearson Education, Inc.

8. Pricing Strategies and Tactics (cont’d) • Pricing Tactics • Price lining • Offering all items in certain categories at a limited number of prices (price points) • Psychological pricing • Odd-even pricing: Customers prefer prices that are not stated in even dollar amounts • Discounts: Price reductions that stimulate sales © 2009 Pearson Education, Inc.

9. The Distribution Mix • Distribution Mix • The combination of distribution channels by which a firm gets products to end users • Intermediaries (Middlemen) • Help distribute goods, either by moving them or by providing information that stimulates their movement from sellers to customers • Can provide added value by saving consumers both time and money • Wholesalers sell products to other businesses for resale to final consumers • Retailers sell products directly to consumers © 2009 Pearson Education, Inc.

10. The Distribution Mix (cont’d) • Distribution Channel • Path a product follows from producer to end user • Popular Paths • Channel 1: Direct distribution (direct channel) • Channel 2: Retail distribution • Channel 3: Wholesale distribution • Channel 4: Distribution by agents or brokers © 2009 Pearson Education, Inc.

11. FIGURE 12.2 Channels of Distribution © 2009 Pearson Education, Inc.

12. Wholesaling • Wholesalers • Independent operations that sell consumer or business goods • Buy products from manufacturers and sell them to other businesses, and usually provide storage and delivery • Provide additional value-adding services for customers • Agents and Brokers • Sales and merchandising representatives for producers or sellers • Do not own inventory, but manage it for producers © 2009 Pearson Education, Inc.

13. FIGURE 12.3 The Value-Adding Intermediary © 2009 Pearson Education, Inc.

14. Retailing • Types of Retail Outlets • Product line retailers carry broad product lines • Department stores and supermarkets • Specialty stores carry one line of related products • Bargain retailers carry wide ranges of products and come in many forms • Discount houses, catalog showrooms, factory outlets, wholesale clubs • Convenience stores offer accessible locations and ease of purchase © 2009 Pearson Education, Inc.

15. Retailing (cont’d) • Nonstore Retailing • Vending machines • Direct-response retailing • Mail order (or catalog marketing) • Telemarketing • Direct selling © 2009 Pearson Education, Inc.

16. The Ascent of the E-Intermediary E-Intermediaries • Internet-based channel members who perform one or both of two functions: • Collect information about sellers and present it to consumers • Help deliver Internet products to buyers Types of E-Intermediaries • Shopping agents (e-agents) help Internet consumers by gathering and sorting information. • Electronic retailing is made possible by communications networks that enable sellers to post product information on consumers’ PCs. © 2009 Pearson Education, Inc.

17. Electronic Retailing • Electronic Catalogs (E-catalogs) • Use the Internet to display products • Electronic Storefronts (virtual storefronts) • A website from which consumers collect information about products, place orders, and pay for purchases • Cybermalls • Collections of virtual storefronts representing diverse products • Interactive and Video Marketing • Lets viewers shop at home by phoning in or e-mailing orders © 2009 Pearson Education, Inc.

18. TABLE 12.1 Top 10 Online Retailers © 2009 Pearson Education, Inc.

19. Physical Distribution • Physical Distribution • The activities needed to move products from manufacturer to consumer • Makes goods available when and where consumers want them • Keeps costs low • Provides services to satisfy customers © 2009 Pearson Education, Inc.

20. Physical Distribution (cont’d) • Warehousing Operations • Private warehouses are owned by producers • Public warehouses provide rented storage space • Transportation Operations • Principal differences are speed and cost • Transportation Modes • Trucks • Planes • Water carriers • Railroads • Pipelines © 2009 Pearson Education, Inc.

21. Physical Distribution (cont’d) • Physical Distribution and E-Customer Satisfaction • Order fulfillment • Involves getting the product to each customer in good condition and on time • Distribution as a Marketing Strategy • Distribution is an increasingly important way of competing for sales. • For some firms distribution is a cornerstone of business strategy © 2009 Pearson Education, Inc.

22. The Importance of Promotion • Promotion • The techniques a firm uses for communicating information about products • Promotional Objectives • To communicate information • To position products • To add value • To control sales volume • Positioning • Establishing an easily identifiable product image in the minds of consumers by fixing, adapting, and communicating the nature of the product itself © 2009 Pearson Education, Inc.

23. The Importance of Promotion (cont’d) • Promotional Mix Tools • Advertising • Personal selling • Sales promotions • Publicity and public relations • Promotional Mix • The combination of promotional tools © 2009 Pearson Education, Inc.

24. The Importance of Promotion (cont’d) • Matching Promotional Tools with Stages in the Buyer Decision Process: • Buyers recognize the need to make a purchase • Best tool: advertising and publicity • Buyers search for information about products • Best tool: advertising and personal selling • Buyers compare benefits and features of competing products • Best tool: personal selling • Buyers choose products that are a good value and buy them • Best tool: sales promotion and personal selling • Buyers evaluate products after the purchase • Best tool: advertising and personal selling © 2009 Pearson Education, Inc.

25. Advertising Promotions • Advertising • Paid, non-personal communication by which an identified sponsor informs an audience about a product • Advertising Media • The specific communication devices for carrying a seller’s message to potential customers • Media Mix • The combination of media through which a company advertises © 2009 Pearson Education, Inc.

26. FIGURE 12.4 Top 10 National Advertisers © 2009 Pearson Education, Inc.

27. TABLE 12.2 Media Use, Strengths and Weaknesses © 2009 Pearson Education, Inc.

28. Personal Selling • Personal Selling • A salesperson communicates one-to-one with potential customers to identify their needs and align them with the seller’s products • Can be the most expensive form of promotion • Personal Selling Tasks • Order processing • Creative selling • Missionary selling © 2009 Pearson Education, Inc.

29. Sales Promotions • Sales Promotions • Short-term promotional activities designed to encourage consumer buying, industrial sales, or cooperation from distributors • Types of Sales Promotions • Samples • Coupons • Premiums • Contests • Point-of-sale displays • Trade shows © 2009 Pearson Education, Inc.

30. Publicity and Public Relations • Publicity • Information about a company, a product, or an event transmitted by the general mass media to attract public attention • Public Relations • Company-influenced publicity that seeks either to build good relations with the public or to deal with unfavorable events © 2009 Pearson Education, Inc.