 Selecting the pricing objective
 The company has to decide where to
position its market offering
 Then it need to purs...
1. Survival
 Plagued with overcapacity, intense
competition or changing consumer
wants-short run.
 Profit is secondary, ...
2. Choose the maximum current prices,
sacrificing long run performance, ,
ignoring competitors reaction, and
legal restrai...
3. Maximise market share. Higher sales
volume lower unit costs and higher long-run
profit.
 The market is highly price se...
4. Price skimming: Setting high prices to skim
the market
 A number of buyers have high current
demand
 The unit cost of...
5. A company may aim to be product-
quality leader in the market.
 Other Pricing objectives are
Partial cost recovery, fu...
Determining Demand
 Each pricing will lead to a different kind of
demand.
 The relation between alternative prices
and t...
a. Inelastic Demand b. Elastic Demand
P
r
i
c
e
Qty. Demanded per period
P
r
i
c
e
Qty. Demanded per period
$15
$10
100 10...
 Price Sensitivity: There are nine factors
identified.
1. Unique value effect: Less sensitive when product is
distintive
...
5. End benefit effect: Less sensitive when the
smaller the expendityre is to the total cost of
the end product
6. Shared-c...
Marketing channels
 Most marketers do not sell their goods
directly to the cutomers
 They have intermediaries constituti...
 Three types of intermediaries:
1. Merchants: Wholesalers or Retailers- buy,
take title to and resell
2. Agents: brokers,...
 Marketing channels are sets of interdependent
organisations involved in the process of makng a
product or service availa...
 Why is Marketing channel needed ?
1. Financial resources
2. Not feasible
3. ROI can be more in their main business
 Int...
 Channel functions and flows:
 Moving goods from producers to
consumers – key functions
i. Gather information
ii. Develo...
iv. Place orders with manufacturers
v. Fund for inventories
vi. Cover risk on channel work
vii. Storage and movement
viii....
 Channel levels- Upto six levels :
1. Zero – level – direct level
2. One level – Retailer
3. Two level – Wholesaler and R...
 Service sector channels:
 Hospitals and schools
 Customers desired service output
levels:
1. Lot size
2. Waiting time
3. Spatial convenience
4. Product Variety
5. Servic...
 Identifying major channel alternatives:
1. Types of intermediaries : The firm
need to identify the types of
intermediari...
2. Number of intermediaries: Exclusive
distribution
i. Exclusive
ii. Selective
iii. Intensive
 Terms and responsibility of channel
partners:
 Each channel member must be
treated respectfully and given
opportunities...
 Trade-relation mix:
1. Price policy
2. Conditions of sale
3. Territorial rights
4. Mutual services and responsibilities
 Evaluating channel members:
1. Economic
2. Control
3. Adaptive
 Channel management decisions:
1. Selecting channel members:
2. Training channel members
3. Motivating channel members: C...
 Eliciting power to mange:
1. Coercive power
2. Reward power
3. Legitimate power
4. Expert power
5. Referent power
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  1. 1.  Selecting the pricing objective  The company has to decide where to position its market offering  Then it need to pursue its objective through pricing: 1. Survival 2. Maximum current profit 3. Maximum Market Share 4. Maximum Market Skimming 5. Product – Quality Leadership
  2. 2. 1. Survival  Plagued with overcapacity, intense competition or changing consumer wants-short run.  Profit is secondary, to cover some fixed costs and variable costs
  3. 3. 2. Choose the maximum current prices, sacrificing long run performance, , ignoring competitors reaction, and legal restraint on price. This strategy assumes that the firm has knowledge of its demand and cost functions.
  4. 4. 3. Maximise market share. Higher sales volume lower unit costs and higher long-run profit.  The market is highly price sensitive and low price stimulates market growth  Production and distribution costs fall  A low price discourages potential competition.
  5. 5. 4. Price skimming: Setting high prices to skim the market  A number of buyers have high current demand  The unit cost of producing a small volume are not high  The high initial price does not attract more competitors  The high price communicates the image of a superior product.
  6. 6. 5. A company may aim to be product- quality leader in the market.  Other Pricing objectives are Partial cost recovery, full cost recovery, social price etc.
  7. 7. Determining Demand  Each pricing will lead to a different kind of demand.  The relation between alternative prices and the demand can be plotted into a demand curve. a. Inelastic Demand: Inversely proportional b. In case of luxury or prestigious goods slope will be upwards. If too high high the level will fall.
  8. 8. a. Inelastic Demand b. Elastic Demand P r i c e Qty. Demanded per period P r i c e Qty. Demanded per period $15 $10 100 105 50 150 $10 $15
  9. 9.  Price Sensitivity: There are nine factors identified. 1. Unique value effect: Less sensitive when product is distintive 2. Substitute-awareness effect: Less sensitive when substitute are not known 3. Difficult-comparison effect: Less sensitive when they cannot compar the quality 4. Total-expenditure effect: Less sensitive the lower the expenditureis as a part of their total expenditure
  10. 10. 5. End benefit effect: Less sensitive when the smaller the expendityre is to the total cost of the end product 6. Shared-cost effect: Less sensitive when the part of the cost is shared by another party 7. Sunk-investment effect: Less sensitive when the the product is used in conjunction with assets previously bought 8. Price-quality effect: Less sensitive when the product is assumed to have more quality, prestige, or exclusiveness 9. Inventory-effect: Less sensitive when they cannot store the product.
  11. 11. Marketing channels  Most marketers do not sell their goods directly to the cutomers  They have intermediaries constituting a Marketing channel or a trade channel  Forward flow  Backward flow
  12. 12.  Three types of intermediaries: 1. Merchants: Wholesalers or Retailers- buy, take title to and resell 2. Agents: brokers, manufacturers representatives, sales agents-search for customers and and negotiate on the producers behalf but do not take title of the goods 3. Facilitators: - Assist in distribution – transportation, banks, warehouse, advertising agencies, etc
  13. 13.  Marketing channels are sets of interdependent organisations involved in the process of makng a product or service available for use or consumption
  14. 14.  Why is Marketing channel needed ? 1. Financial resources 2. Not feasible 3. ROI can be more in their main business  Intermediaries normally achieve superior efficiency in making goods widely available and accessible to target markets.
  15. 15.  Channel functions and flows:  Moving goods from producers to consumers – key functions i. Gather information ii. Develop and disseminate persuasive communications iii. Agreement on price to transfer ownership
  16. 16. iv. Place orders with manufacturers v. Fund for inventories vi. Cover risk on channel work vii. Storage and movement viii. Payment of bills ix. Oversee actual transfer of ownership
  17. 17.  Channel levels- Upto six levels : 1. Zero – level – direct level 2. One level – Retailer 3. Two level – Wholesaler and Retailer 4. Three level
  18. 18.  Service sector channels:  Hospitals and schools
  19. 19.  Customers desired service output levels: 1. Lot size 2. Waiting time 3. Spatial convenience 4. Product Variety 5. Service backup
  20. 20.  Identifying major channel alternatives: 1. Types of intermediaries : The firm need to identify the types of intermediaries avilable to carry on its channel work
  21. 21. 2. Number of intermediaries: Exclusive distribution i. Exclusive ii. Selective iii. Intensive
  22. 22.  Terms and responsibility of channel partners:  Each channel member must be treated respectfully and given opportunities to be profitable.
  23. 23.  Trade-relation mix: 1. Price policy 2. Conditions of sale 3. Territorial rights 4. Mutual services and responsibilities
  24. 24.  Evaluating channel members: 1. Economic 2. Control 3. Adaptive
  25. 25.  Channel management decisions: 1. Selecting channel members: 2. Training channel members 3. Motivating channel members: Channel offering, Channel building programs
  26. 26.  Eliciting power to mange: 1. Coercive power 2. Reward power 3. Legitimate power 4. Expert power 5. Referent power
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