class 12

PRINCIPLES OF MARKETING: PRICE & PLACEMENT

Course Overview

  • Course Title: Principles of Marketing

  • Level: Class 12

  • Institution: Leeds School of Business, University of Colorado Boulder

  • Term: Spring 2026

The Final 2 P’s of Marketing

  • Price (Value)

    • Refers to the monetary value exchanged by consumers for products or services.

  • Placement (Distribution)

    • Concerns how products reach consumers, from production to point of sale.

  • Course Wrap-up Considerations:

    • Final Exam logistics

    • Course grades

PRICE (VALUE)

Understanding Price

  • Definition of Price: Price is what the consumer/customer exchanges for value.

  • Importance of Price:

    • It steers demand as customers must be willing to pay it.

    • Generates sufficient revenue to cover operational costs.

    • Contributes to creating or diminishing competitive advantage in the marketplace.

Different Terminology Based on Item Type

  • Price Equation:

    • Final Price = List Price - Incentives and Allowances

  • Product Types and Corresponding Prices:

    • New car:

    • Final Price = List Price - Rebate

    • College Tuition:

    • Tuition = Published Tuition - Scholarship - Other Financial Aid

    • Merchandise bought from a wholesaler:

    • Invoice Price = List Price + Extra Fees

Examples of Pricing Structure

  • Cash Discounts: Discounts offered on timely payment or during promotions.

  • Seasonal Discounts: Lower prices offered during off-peak times.

  • Quantity Discounts: Reductions based on the number of units purchased.

Pricing Strategy Selection

  • Strategies vary based on market conditions and product lifecycle.

  • Types of Pricing Strategies:

    • Penetration Pricing: Low introductory prices to establish market presence.

    • Price Skimming: High initial pricing before gradually lowering it over time.

    • Promotional Pricing: Temporary low pricing to increase sales volume.

    • Destroyer Pricing: Maintaining low prices to eliminate competition before raising them.

    • Demand-Oriented Pricing: Adjust pricing based on demand characteristics.

Key Considerations in Pricing

  • Top-Line Considerations:

    • Brand positioning

    • Target segment

    • Competition

    • Revenue growth

  • Bottom-Line Considerations:

    • Cost of goods sold

    • Operating expenses

    • Taxes and debt

    • Profit margins

    • Market expectations and shareholder returns

Process for Setting Price

  • Step 1: Identify pricing objectives

  • Step 2: Estimate demand and revenue relationships

  • Step 3: Determine cost, volume, and profit relationships

    • Including:

    • Marginal revenue estimation

    • Price elasticity analysis

  • Step 4: Select an approximate price level

  • Step 5: Set list or quoted price

  • Step 6: Make special adjustments to list/quoted price

Price Sensitivity (Elasticity)

  • Lower Price Sensitivity Conditions:

    • The product is distinctive or of high quality.

    • Difficulty in comparing substitute products.

    • The product's cost is small relative to total cost.

    • It accompanies previously purchased assets.

    • The product cannot be stored, or consumers are less aware of substitutes.

    • Expenditure is a small part of the consumer's total income or it is subsidized by another party.

Pricing Mistakes to Avoid

  • Common pitfalls in pricing strategy:

    • Setting prices too low continuously.

    • Applying the same profit margin across all products.

    • Ignoring total cost calculations.

    • Engaging in price wars with competitors.

    • Price fixing - discussing pricing with competitors to manipulate market rates.

    • Price maintenance - enforcing a minimum selling price at the distributor/retailer level.

    • Price discrimination - varying prices to consumers based on personal data.

Managing Price in Global Markets

  • Strategies:

    • Downsizing the Product: Adapting sizes to fit local markets (e.g., single-serve units).

    • Cost Savings: Manufacturing adjustments (e.g., Cadbury's initiatives in India).

    • Redesigning Products: Removing features to meet lower price points (e.g., P&G's razor modifications).

Competitive Market Strategies

  • Market Structure Definitions:

    • Monopoly: One seller dominates the market, with no direct competition available

    • Oligopoly: Few large sellers dominate the market (3-10), characterized by high interdependence.

    • Duopoly: Exactly two sellers exist, sharing power, leading to strategic rivalry.

  • Market Power and Examples:

    • Monopoly: Local utilities (water, electricity).

    • Oligopoly: Airlines, smartphones, soft drinks (e.g., Coca-Cola vs. Pepsi).

    • Duopoly: Airbus vs. Boeing, iOS vs. Android.

PLACEMENT (DISTRIBUTION)

Distribution Strategy Components

  • Key Components:

    • Product strategy

    • Pricing strategy

    • Promotion strategy

    • Channel alignment

    • Distribution density

    • Distribution logistics

    • Channel length

Product Type and Distribution Strategy

  • Channel Selection: Varies based on whether the sales approach is direct or indirect.

    • Direct Distribution: Includes own sales force or retail stores.

    • Indirect Distribution: Involves agents, distributors, and wholesalers.

    • Strategy must align with competitive position and marketing objectives.

Importance of Channel Member Selection

  • Effective marketing depends on partnering with the right channel members.

  • Building long-term relationships is crucial for mutual benefit, creating a balanced value equation.

Direct Distribution Channels

  • Advantages:

    • Enhanced market control and efficiency.

    • Collecting market information directly.

    • Active marketing implementation without intermediaries.

  • Disadvantages:

    • High initial costs and operational expenses.

    • Necessity for skilled human resources.

    • Requires significant market share to justify investment.

Indirect Distribution Channels

  • Roles of Intermediaries:

    • Inventory management, financing, selling, promoting, after-sales service.

  • Advantages:

    • Minimized market entry costs and risks.

    • Reduced need for market knowledge.

  • Disadvantages:

    • Lack of market control and direct customer feedback.

    • Possible conflicts with intermediaries leading to product cannibalization.

Multichannel vs. Omnichannel Strategy

  • Multichannel: Various channels available to consumers, not integrated.

  • Omnichannel: All channels interconnected and integrated for a seamless consumer experience.

Push & Pull Strategies

  • Push Strategy: Manufacturer promotes to retailers to stock products.

  • Pull Strategy: Consumers are promoted to, stimulating demand.

  • Conflict Types:

    • Vertical Conflict: Between different levels of the distribution channel.

    • Horizontal Conflict: Between intermediaries at the same channel level, often over market share and sales practices.

Practical Exercises on Push/Pull Strategies

  • Starbucks Example:

    • Activities categorized as either push or pull, analyzing marketing communications across different platforms (e.g., in-store promotions, emails, social media ads, word-of-mouth referrals).

FINAL EXAM LOGISTICS

  • Scope: Covers Classes 7 - 12 (non-cumulative).

  • Date: Midterm administered in class on Tuesday, Feb 24.

  • Format:

    • Closed notes, Scantron sheets for BUSM 2010, electronic for BCOR 2201.

  • Preparation: Bring laptop, charger, #2 pencil, and know Student ID #.

FINAL GRADE INFORMATION

  • Grades including the final exam and course components to be posted by Feb 27.

  • Drop policies applicable to McGraw-Hill and iClicker grades, and potential course curve adjustments will be reflected.