Module 7

1
Module 7

• Managing Distribution Channels and Designing
  Price Strategies
• Kotlers Chapters 15, 16, and 17

2
Chapter 15 Designing Price Strategies and
Programs

• Learning Objectives
• 1. Describe/apply the six step procedure for how
  price setting works.
• 2. Discuss the different strategies involved
  with adapting prices.

3
Chp 15/Obj 1 Describe/apply the six step
procedure for how price setting works.

• 1. Selecting the Price Objective.
• 2. Determining Demand.
• 3. Estimating Costs.
• 4. Analyzing Competitors costs, prices, and
  offers.
• 5. Selecting a Pricing Method.
• 6. Selecting the Final Price.

4
Chp 15/Obj 1 Describe/apply the six step
procedure for how price setting works.

• 1. Selecting the Price Objective.
• 5 Major Objectives Through Pricing
• Survival - SR, cover at least variable costs
• Maximum Current Profit - but may hurt in LR
• Maximum Market Share - market penetration price
• Maximum Market Skimming - set high prices but may
  attract competition
• Product-Quality Leadership - focus on nonprice
  issues

5
Chp 15/Obj 1 Describe/apply the six step
procedure for how price setting works.

• 2. Determining Demand - demand sets ceiling on
  price the firm can charge
• Demand curve - illustrates the relation between
  alternative prices and the resulting current
  demand typically inversely related
• Must address price sensitivity
• Must estimate demand curves
• Consider the price elasticity of demand - note
  that SR elasticity may differ from LR

6
Chp 15/Obj 1 Describe/apply the six step
procedure for how price setting works.

• 3. Estimating Costs - costs set the floor
• Must consider types of costs and how levels of
  production impact cost
• Consider effects of accumulated production but
  experience-curve price can be risky
• Consider differentiated marketing offers -
  utilize activity-based costs to determine
  profitability of different retailers
• Can consider target costing - look at each
  element of cost to bring to desired range

7
Chp 15/Obj 1 Describe/apply the six step
procedure for how price setting works.

• 4. Analyzing Competitors costs, prices, and
  offers - anticipate possible price reactions.
• 5. Selecting a Pricing Method.
• Markup pricing - ignores demand, value,
  competition but easiest
• Target return pricing -focuses on ROI, same
  problems as above
• Perceived-value pricing - research what customers
  think its worth
• Value pricing - fairly low price for high
  quality, reengineer to become low cost producer
  utilize EveryDayLowPricing
• Going-rate pricing - price based on competition
• Sealed-bid pricing - bids set based on what think
  competition will bid but maximize expected profit

8
Chp 15/Obj 1 Describe/apply the six step
procedure for how price setting works.

• 6. Selecting the Final Price
• Psychological pricing - consider price/quality
  relationship, reference price, status
• Influence of other marketing-mix elements -
  charge higher prices if advertise more
• Be consistent with company pricing policies
• Impact of price on other parties - consider sales
  force, channel members, government

9
Chp 15/Obj 2 Discuss the different strategies
involved with adapting prices.

• Geographical Pricing - Cash, Countertrade - offer
  other items for payment, Barter - direct exchange
  of goods
• Price Discounts and Allowances - Cash, quantity,
  functional (trade), seasonal, allowances (ex.
  promotional allowances for participating in ads)
• Promotional Pricing - Loss leader, special event,
  cash rebate, low-interest financing, longer
  payment terms, warranties/service contracts,
  psychological discounting
• Discriminatory Pricing - customer segment,
  product form, image, location, time - yield
  pricing, predatory pricing illegal
• Product-Mix Pricing - product-line pricing,
  optional-feature pricing, captive-product (cheap
  razors/expensive blades), two-part (fixed fee
  variable use fee), by-product, product-bundling

10
Chapter 16 Managing Marketing Channels

• Learning Objectives
• 1. Describe/apply what is involved in designing
  a channel.
• 2. Describe/apply the issues involved in
  channel-management decisions.
• 3. Describe vertical, horizontal, and
  multi-channel marketing systems and the issues
  that surround them.

11
Chp 16/Obj 1 Describe/apply what is involved in
designing a channel.

• Marketing Channels
• Sets of interdependent organizations involved in
  the process of making a product available for
  use/consumption
• Use of channels involves some sacrifice of
  control and compromising, but may be cost
  effective and efficient
• Channel Design Decisions
• Calls for analyzing customers needs,
  establishing channel objectives, identifying and
  evaluating major channel alternatives

12
Chp 16/Obj 1 Describe/apply what is involved in
designing a channel.

• Customers Desired Service Output Levels
• What customers want Lot size, waiting time,
  spatial convenience, product variety, and service
  backup with more service - more costs and higher
  prices.
• Objectives and Constraints
• Need to arrange tasks to minimize costs given
  desired output level and real world constraints.
• Major Channel Alternatives
• Consider the types of business intermediaries,
  the number needed (exclusive, selective, or
  intensive distribution), and the
  terms/responsibilites (ex. distibutors
  territory) of each channel member. Make decision
  based on economic, control, and adaptive
  (ability to change - but channel decisions often
  LT) criteria.

13
Chp 16/Obj 2 Describe/apply the issues involved
in channel-management decisions.

• Selecting Channel Members - chose best members
  you can
• Training Channel Members - will represent your
  company so must understand products/customers
• Motivating Channel Members - to shape behavior -
  must understand needs, use power to elicit
  cooperation coercive, reward, legitimate,
  expert, and referent but need to create an
  atmosphere of mutual trust that understands the
  mutual goals of network, partnerships
• Evaluating Channel Members - evaluate channel
  members regularly to see if meeting expectations
  also evaluate fit between product and channel as
  may change over PLC
• Modifying Channel Arrangements - may be able to
  make incremental changes but may need to revise
  entire channel strategy after researching target
  customers values, perceptions, needs.

14
Chp 16/Obj 3 Describe vertical, horizontal, and
multi-channel marketing systems and the issues
that surround them.

• Vertical Marketing Systems - for control issues
• 1 channel member (channel captain) owns,
  franchises, or otherwise controls all others
  forms include corporate, administered, and
  contractual
• Horizontal Marketing Systems
• 2 or more unrelated firms put together resources
  or programs to exploit an emerging marketing
  opportunity
• Multichannel Marketing Systems
• Single firm uses 2 or more marketing channels to
  reach different market segments. Gain more
  market coverage lower costs, and customized
  selling, but more conflict.

15
Chp 16/Obj 3 Describe vertical, horizontal, and
multi-channel marketing systems and the issues
that surround them.

• Issues include Conflict, Cooperation,
  Competition, and Legal/Ethical
• Conflict can be vertical, horizontal or
  multi-channel (particularly when 1 member gets a
  lower price due to volume). Can be caused by
  incompatible goals and unclear roles/rights.
• To address conflict need communication, strong
  relationships in which everyone benefits and has
  confidence in the overall desirability of the
  channel, and in which there are clear, common
  goals.
• Major legal issues are that channel arrangement
  does not lessen competition or create a monopoly
  and that all parties entered in the agreement
  voluntarily.

16
Chapter 17 Managing Retailing, Wholesaling, and
Market Logistics

• Learning Objectives
• 1. Describe the types of retailers, the
  marketing decisions they have to make, and the
  trends in retailing.
• 2. Describe the types, decisions, and trends
  involved in wholesaling.
• 3. Describe the issues involved with market
  logistics.

17
Chp 17/Obj 1 Describe the types of retailers,
the marketing decisions they have to make, and
the trends in retailing.

• Retailing includes all activities involved in
  selling goods or services directly to final
  consumers for personal, nonbusiness use.
• New retail types emerge as marketplace changes
  per the wheel of retailing hypothesis. Growth of
  nonstore retail.
• Retailers can position themselves based on level
  of service offered and different assortment
  breadths.
• Types include specialty store, department store,
  supermarket, convenience store, discount store
  (includes WalMart etc.. and category killers),
  off-price retailer, superstore, and catalog
  showroom (See Table 17-1).

18
Chp 17/Obj 1 Describe the types of retailers,
the marketing decisions they have to make, and
the trends in retailing.

• Decisions retailers have to make include
• Target market - must be defined/profiled
• Product assortment and procurement - determine
  breadth and depth
• Service/store atmosphere - service a key means to
  differentiate but must manage expectations,
  address service mix
• Price and Promotion
• Place - location, location, location

19
Chp 17/Obj 1 Describe the types of retailers,
the marketing decisions they have to make, and
the trends in retailing.

• Trends include
• New retail forms and combinations
• New retail forms facing a shorter life span
• Electronic age increases nonstore retailing
• Competition is intertype (between dif types of
  stores)
• Retailers either mass merchandisers or specialty
• Supercenters now doing what department
  stores/malls used to do - 1 stop shopping
  convenience
• Marketing channels more professionally
  managed/programmed.
• Technology is a critical competitive tool.
• Retailers going global.
• Retailers provide means to congregate/socialize.

20
Chp 17/Obj 2 Describe the types, decisions, and
trends involved in wholesaling.

• Wholesaling (distributors) - all activities
  involved in selling goods or services to those
  who buy for resale or business use.
• Types include merchant, full-service,
  limited-service, brokers, agents, manufacturers
  and retailers branches/offices, and miscellaneous
  - specialists types (see Table 17-4)
• Decisions include target market, product
  assortment and service, price, promotion, place.
• Trends include adapt service to meet suppliers
  and target customers needs add value to channel
  reduce costs.

21
Chp 17/Obj 3 Describe the issues involved with
market logistics.

• Physical Distribution - process of getting goods
  to customers
• Supply Chain Management - seeks to improve
  physical distribution by taking input procurement
  and suppliers into account - stretches chain
  backwards but still only sees markets as only
  destination points.
• Market Logistics - involves planning,
  implementing, and controlling the physical flow
  of materials and final goods from points of
  origin to points of use to meet customer
  requirements at a profit (examines demand chain)

22
Chp 17/Obj 3 Describe the issues involved with
market logistics

• Marketing Logistics calls for integrated
  logistics systems (ILS) abetted by information
  technology (IT). Aims to make goods delivery a
  value-added process and reduce costs.
• Have to set clear, not conflicting objectives
  (recognize trade-offs have to be made).
• Decide how to handle order processing, where to
  locate stocks (warehousing) and how much
  (inventory), and how to transport goods.
• Need to address from a systems approach.

23
Module 7 Conclusion

• Price, while the most flexible variable marketing
  mix, is often poorly addressed.
• Need to consider costs, objectives, rest of
  marketing mix, competition and target market when
  setting price.
• A marketing network is only as strong as its
  weakest member - the real competition is between
  marketing networks. Balance services needed
  versus cost and control.
• In making any place decision (channel) have to
  consider it from final customer perspective and
  how to best meet firms objectives.
• Any Questions?