Chapter 12 Student
MARK 1115 Week 10
Recap
Understanding Price and Cost
Price: Perceived differently by consumers and sellers.
For consumers, it reflects the cost of goods desired.
For sellers, it represents revenue generated.
Importance: Consumers purchase value, not the product itself.
Importance of Price to Marketing Managers
Key Concepts:
Price significantly impacts profits and revenues.
Steps in Setting the Right Price
Establish Pricing Objectives:
Status Quo: Maintain current prices or match competition budget.
Sales Oriented: Focus on increasing market share or maximization of sales, often short-term.
Profit Oriented:
Price to maximize revenue relative to costs.
Set for satisfactory profits or target ROI.
Estimate demand, costs, and profits.
Choose a Price Strategy:
Initial base pricing informed by market considerations.
Fine-tune with Pricing Tactics.
Final Results: Achieve optimal pricing based on all factors.
Pricing Objectives Explained
Profit Maximization: Achieve high revenue relative to costs, may not equate to high prices.
Satisfactory Profits: Ensure reasonable earnings, often linked to corporate social responsibility (CSR).
Target ROI: Set prices to achieve a specified return on investment.
Breakeven Pricing
Formula: Breakeven = Fixed Cost / (Price – Variable Cost)
Fixed Costs: Consistent expenses that do not vary with production levels (e.g., rent, salaries).
Variable Costs: Costs that fluctuate with output levels.
Breakeven Pricing Example: Pizza
Variable Costs: Total = $5.56
Fixed Costs: Total = $5,650
Price: $10
Breakeven Calculation: Must sell 1,273 pizzas at $10 each to break even.
Choosing a Price Strategy
Consideration of product positioning and associated costs.
Approaches to Pricing:
Skimming: Start high and lower prices over time.
Penetration: Begin with low prices, aiming for market share.
Status Quo: Match competitors’ prices.
Competitive: Set prices aligned with rivals.
Cost Plus: Add a markup to the cost of producing a product.
Pricing Tactics
Base Price Setting: Define a general price level.
Adjustments: Use various tactics to respond to market changes while focusing on profitability.
Chapter 12 - Marketing Channels
Learning Objectives
Understand marketing channels’ nature.
Identify channel intermediaries and their roles.
Discuss types of marketing channels and strategies.
Manage channel relationships and supply chain dynamics.
Recognize challenges in global distribution.
What is a Marketing Channel?
Definition: A network of organizations working together to make a product or service available for consumption.
Nature: Involves multiple entities relying on each other within the channel.
Structure of Marketing Channels
Supply Chain: Consists of upstream (producers) and downstream (distributors) elements.
Value Delivery Network: Producers, suppliers, distributors, and customers working synergistically to enhance customer value.
Importance of Marketing Channel Strategies
Acts as a gatekeeper between manufacturers and end-users.
Influences brand perception and market positioning.
Strong channel systems create sustainable competitive advantages.
Case Study: Walmart
Goal: Provide goods efficiently.
Directly collaborates with manufacturers for cost management.
Remarkably low distribution costs, facilitated by technology in demand forecasting and inventory management.
Channel Members
Key Players: Manufacturers, end-users, and intermediaries (wholesalers, retailers).
Roles: Facilitate the flow of products and information.
Major Types of Distribution Channels
Manufacturer to End User
Manufacturer to Wholesaler to Retailer to End User
Various combinations depending on products and market needs.
How Intermediaries Help
Specialization and division of labor lead to efficiency.
Overcome discrepancies in product availability and reach.
Ensure contact efficiency, enhancing market transactions.
Value Addition by Channel Members
Provide information, promotion, and distribution.
Assist in negotiation and financing.
Offer after-sales support to enhance customer relationships.
Distribution Intensity Levels
Intensive Distribution: Mass market reach.
Selective Distribution: Collaborate with chosen intermediaries.
Exclusive Distribution: Partner exclusively for specialty goods.
Channel Power, Control, and Leadership
Defined as the influence one member can exert on another within a channel.
Leadership typically assumed by the channel captain.
Channel Conflict
Horizontal: Conflict among same level channel members (e.g., same type of retailer).
Vertical: Conflict between different channel levels (e.g., supplier and retailer).
Vertical Marketing Systems (VMS)
A unified channel structure with cooperative efforts among manufacturers, wholesalers, and retailers.
Examples include companies that own multiple levels of their distribution chain.
Supply Chain Management
Focused on customer needs and efficient operation from sourcing to consumption.
Enhances overall efficiencies and effective market engagement.
Distribution Challenges in Global Markets
Necessity for adaptation to various channel structures based on local market conditions.
Retail Trends and Developments
Experiential Shopping: Creating engaging store environments.
In-Store Technology: Digital tools to enhance shopping experiences.
Social Media’s Role: Integration of mobile devices in shopping habits.
Summary of Retail Trends
Green Retailing: Adoption of sustainable practices, offering long-term benefits.
International Challenges: Navigating culture and logistics in diverse markets.