Marketing Distribution & Pricing

Distribution (Place)

  • Distribution (Place): Where the product/service is offered; where consumers can purchase the brand.
  • More complex definition: Observing all the factors that facilitate getting the brand to the consumer.
  • Impacts marketing, business objectives, competitive dynamics, and customer perception.

Three Distribution Decisions

  • Form of distribution channels: Are there multiple people in that channel choice?
  • Distribution intensity: Where milk is vs. where a designer handbag is.
  • Selection of distributor(s)/channel(s): Designer bag in Kmart?

Marketing Channel

  • A set of interdependent organizations that facilitate the transfer of ownership as products move from producer to business user or consumer
  • Channel members: All parties who negotiate, buy, and sell products, facilitating the change of ownership.

Why Distributors Matter (e.g., The Iconic)

  • Connects brands to consumers in one central platform.
  • Easier to compare brands.
    • Pros for brands: Wider reach, reduced operational complexity, shared platform benefits.
    • Cons for brands: Less control over brand, lower margins, more competition.
  • Help reduce transactions and increase convenience.

Marketing Channels

  • Direct channel: Marketer to buyer (e.g., fashion selling through Depop or Instagram).
  • Retailer channel: Sell to retailers like Woolworths, then to consumers.
  • Wholesaler channel: Wholesalers stock products from different businesses (e.g., PFD supplying cafes and restaurants).
  • Agent/Broker Channel: Real estate, stockbroker
  • More steps = less control.

Distribution Intensity

  • How widely available is the product?

Intensive

  • Maximum availability; products found everywhere (e.g., Coca-Cola, chips).
  • More shelf space = more chances of being bought.

Selective

  • Available in a limited number of stores or outlets, still reasonably accessible (e.g., Nike, iPhone).
  • Strategic about where they show up; brand positioning matters.

Exclusive

  • Very limited availability, often selling direct or through one or two partners (e.g., Rolex, Ferrari).
  • Focus on specific geographical locations; very select channels and partnerships.
  • Can change over product lifecycle.

Selection of Distributors

  • Examples:
    • TK Max selling Gucci (potentially damaging brand image).
    • Ortc partnering with The Iconic (increased visibility).
    • Boost selling bottled juice in supermarkets (increased convenience and access).

Pricing

  • The way a price is presented is more important than the price itself.
  • Price: Amount of money charged for a product or service; the sum of values consumers exchange for the benefits of having or using the product or service.
    • Only element in the marketing mix that directly produces revenue exchange.
    • One of the most flexible marketing mix elements.
    • Number-one problem facing many marketing executives in price-competitive marketplaces.
  • Marketers must consider:
    • What consumers “pay”?
    • What can we “charge”?
  • Sales/Discounts:
    • Boost short-term sales but can tarnish brand reputation in the long run.
    • Trains customers to expect sales and eats into margins.

Steps to Setting the Right Price

  1. Establish Pricing Objectives

    • What are you trying to achieve with your pricing?

    • Examples:

      • Maximize profit
      • Gain Market Share
      • Quick Growth
      • Positioning your brand as premium
        • Profit-Oriented: Maximize ROIROI (luxury products/niche services).
        • Sales-Oriented: Maximize unit sales or market share (e.g., Kmart, Cotton On).
        • Status Quo: Maintain alignment with competitors (e.g., Coles and Woolworths).
        • Examples of this pricing:
        • Aldi = Sales Orientated, High Volume at Low Cost Doesn't care what others are doing
        • Hermes = Profit, High Margin Focusing on Profit per Item not Volume
        • Woolies = Status Que Constantly Price Comparisons

  2. Understand Factors Impacting Price

    • Cost of demand: How much people are willing to pay.

    • Costs: Production, distribution, marketing.

    • Competitors: What are they charging?

    • External factors: Economic trends, regulations, seasonal effects.

    • Dish increased prices to be seen as a luxury brand.

    • Vape = inelastic product.

Elasticity of Demand

  • Inelastic vs. Elastic

Cost Determinants of Price

  • Loss-leader pricing: Set prices below cost to attract customers.
  • Variable cost: Varies with output level.
  • Fixed cost: Does not change with output.
  • Mark-up pricing: Cost + expenses + profit.

Select a Pricing Strategy

 - Framework
  • Choose a pricing strategy to determine a base price based on brand and objective (e.g., cost-based, value-based, competition-based).
  • A basic, long-term pricing framework, which establishes the base price for a product and the intended direction for price movements over the product life cycle.

Major pricing strategies

Five main pricing strategies:

- customer value-based pricing
 - Cost-based pricing
  • Competition-based pricing
    • Low cost pricing
    • Premium pricing

Customer Value-Based Pricing

  • Set price based on buyers’ perceptions of value, not seller’s costs.
  • Heavily based on market research (focus groups, interviews, surveys).
  • Examples: Penfolds, Tesla. Doesn’t make that much to make a tesla its only coz of elon musk.

Cost-Based Pricing

  • Set prices based on the costs for producing, distributing, and selling the product, plus a fair rate of return.
  • Calculate total cost and add a margin.
  • Common in construction.
  • doesn't actually though account for what a consumer is willing to pay for a product.

Competition-Based Pricing

  • Set prices based on competitors’ strategies, costs, prices, and market offerings.
  • Match or undercut competitors.
  • Common in competitive markets like household cleaning. Price products based on others prices

Low-Cost Based Pricing

  • Price products/services to be cost-competitive.
  • E.g., Aldi, Boohoo; can damage brand image.

Premium Pricing

  • Set prices higher than similar products to position as high-quality or luxury.
  • Used for unique features, exceptional quality, or a strong brand image.
  • Examples: Dyson; Aloe Yoga (status).

Fine-Tune Base Price with Pricing Tactics

  • Apply tactics like discounts, bundles, psychological pricing, promotional pricing, and geographic adjustments.
  • Adjust price to match different consumer groups, times, and marketing goals.

Pricing Tactics

  • Discounts and promotions
  • Bundling
  • Psychological pricing
  • Product line pricing
  • Segmented pricing
  • Dynamic pricing

Product Line Pricing

  • Set price steps between products in a line, considering cost differences and customer perceptions.
  • Establish perceived quality differences to support price differences.
  • Example: Car models (base, mid-range, top-of-the-line).

Additional-Product Pricing

  • Offer optional or accessory products along with the main product.
  • Decide which items to include in the base price and which to offer as options.
  • Example: Optional meal on budget airline flights.

Discount Pricing

  • Straight reduction in price during a stated period or for large quantities.
Types:
  • Quantity discount
  • Seasonal discount
    • Risk: Training customers to only buy on sale; weakening brand value.

Segmented Pricing

  • Sell a product/service at two or more prices, not always based on cost differences.
  • Examples: Student/senior metro cards.
  • Gillette Example.

Psychological Pricing

  • Consider the psychology of prices, not simply the economics.
  • Odd vs. even pricing (e.g., 1.991.99, 2.002.00).
  • Using numbers consumers consider lucky, E.g. Chinese with the number 8
  • Luxury brands use full number pricing.

Dynamic Pricing

  • Adjust prices continually to meet the needs of buyers and market situations.
  • Examples: Grab/Uber (fares higher due to high demand), Gym/Fitness Center