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Marketing Mix and Relationship Marketing. Lecturer – Shahed Rahman Part – 2. The Pricing ingredient. Price is the ultimate measure of a good’s or service’s exchange value as agreed upon by the seller and buyer Price is important because it directly affects the channel member’s profitability

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marketing mix and relationship marketing

Marketing Mix and Relationship Marketing

Lecturer – ShahedRahman

Part – 2

the pricing ingredient
The Pricing ingredient
  • Price is the ultimate measure of a good’s or service’s exchange value as agreed upon by the seller and buyer
  • Price is important because it directly affects the channel member’s profitability
  • Valuation –Perceived value
  • In marketing channel each partner provides some added value to the offering
  • Not all buyer are not looking for the cheapest price – ( Resellers)
a price premium
A Price Premium
  • A price premium is a price level in excess of the normal market or industry value. Channel members may justify price premiums for a number of reasons including:
  • Building relationship – In order to develop a long term relationship with a prospective exchange partner
  • Preserving a Relationship – Has a long history of association with an exchange partner.
a price premium1
A Price Premium
  • Reducing Risk factors – when the situation is risky- to secure the intangible attributes.
    • Consumers also pay more for an established brand name product for a reduction in their perceptions of risks.
  • Obtaining perceived quality- Channel members can rationalize that the price premium is related to higher quality exchange performance such as on time delivery
  • Possessing Limited Information- Channel members may pay a price premium because they do not have sufficient information with regard to the market pricing
price elasticity of demand
Price Elasticity of Demand
  • Percentage change in the amount of a good demanded in response to a percentage change in price.
  • Situational considerations effect a product’s price elasticity
  • Changes in price elasticity of demand can occur at any channel level
pricing method
Pricing Method
  • Algorithmic Pricing Method
    • Inside – Out Approach
    • Price is resulting from the channel member’s forecast of their own cost and revenue
  • Market oriented Pricing Method
    • Outside – in approach
    • Pricing cues are generated from an evaluation of threats and opportunities
  • Relationship Oriented Pricing
    • Before a price is established , internal and external cues are simultaneously evaluated in an effort to build and maintain exchange relationships.
algorithmic pricing methods
Algorithmic Pricing Methods
  • Break Even Analysis
    • Convergence between the cost associated with making a product and the revenues realized from selling the product
    • Buyers do not always behave rationally in the market
    • Revenues also depend on demand- and very hard to estimate the demand
algorithmic pricing methods1
Algorithmic Pricing Methods
  • Cost- Plus Pricing
    • A percentage or fixed markup is added to the cost to establish a price
    • Ignore the effect of market factors – consumer preference , brand loyalty
  • Modified Break-Even Pricing
    • Several estimations of quantity and price
    • Also uncertain about the demand
market oriented pricing
Market Oriented Pricing
  • Competitive Pricing
  • Market Entry Pricing
    • Penetration Pricing
    • Skimming the cream pricing
relationship oriented pricing
Relationship Oriented Pricing
  • Volume pricing
  • Functional Allowances
  • Promotional Allowance
price legitimacy
Price Legitimacy
  • Exists whenever a buyer and sellers perceptions of a market offerings value meet or come together.
  • Consumers dont believe the list price is a real price
  • Customers expect higher prices to result in better service
  • Do not view low prices as justification for poor service
several techniques to justify their pricing levels
Several Techniques to Justify their Pricing Levels
  • Price Guarantees
  • Price Posting
  • Cost of Service Pricing
the promotions ingredient
The Promotions Ingredient
  • Promotion involves any form of purposeful communications employed by channel members with the intent of informing, reminding, persuading prospects and customers regarding some aspects of their market offerings
the promotions ingredient1
The Promotions Ingredient
  • Personal Selling
    • Interpersonal communication process by which a seller uncovers and satisfies the needs of a buyer, to the mutual long term benefit and both parties
  • No Personal Selling
    • Involves all other types of promotions- advertising, PR and sales promotion
    • An organization targeted toward some particular audiences
traditional communication models
Traditional Communication Models







relational communication models
Relational Communication Models



Synchronous cognition



promotional objectives
Promotional Objectives
  • Five objectives are generally associated with relational promotions in marketing channels
    • Stimulating Sales
    • Differentiating Offerings
    • Sharing Information
    • Accentuating a Market Offering’s Value
    • Stabilizing Seasonal Demand
pull vs push strategies
Pull vs Push Strategies
  • Pull Strategy – persuasive communications aimed directly at the consumer
    • Goal to stimulate the final users’ desire for the offering
    • Promotional message generally involves price incentives,
    • Pull strategy often used with new product introductions to entice the consumer early demand for an offering
    • It used to create loyalty in the face of price competition
pull vs push strategies1
Pull vs Push Strategies
  • Push Strategy
    • Producers > Wholesaler> Retailers > Consumers
    • Target their influential communications at intermediaries – pushing against the next link in the distribution chain
    • Push promotional strategies allow the channel participants to exercise greater control over the promotional message
      • Allowance
      • Advance notice
      • Training and support
the place ingredient
The Place Ingredient
  • Place is often described as distribution
  • All those distribution, logistics and behavioral functions that regulate the flow of market offerings between exchange partners
  • The goal of place is to minimize the costs of functions while maximizing customer satisfaction and market coverage
  • Minimizing distribution costs can damage long time channel relationships
    • Forcing retailers to buy in large quantities to cuts it distribution cost
strategic formulation role of marketing concept
Strategic Formulation: Role of Marketing Concept
  • A channel members' markets
  • A channel member’s functional area strategies
  • A channel member’s strategic assets or skills