MARKETING MANAGEMENT 12 th edition C hapter 14 D eveloping P ricing S trategies and P rograms by Dr. Paitoon Chetthamrongchai ดร . ไพฑูรย์ เจตธำรงชัย [email_address] 081-989-0098
Common Pricing Mistakes
Determine costs and take traditional industry margins
Failure to revise price to capitalize on market changes
Setting price independently of the rest of the marketing mix
Failure to vary price by product item, market segment, distribution channels, and purchase occasion
Setting Pricing Policy 1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price
Step 1: Selecting the Pricing Objective
Maximum current profit
Maximum market share
Maximum market skimming
Step 2: Determining Demand
Estimating demand curves
Price elasticity of demand
Step 3: Estimating Costs
Types of Costs
Activity-Based Cost Accounting
Types of Costs Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials
Step 5: Selecting a Pricing Method
Step 4: Analyzing competitor
Step 6: Selecting the Final Price
Impact of other marketing activities
Company pricing policies
Gain-and-risk sharing pricing
Impact of price on other parties
Consumer Psychology and Pricing
We often actively process price information, interpreting prices in terms of their knowledge from past purchasing experience, formal communications, informal communication etc.
Price endings: 9/ 0/ 5
Promotional Pricing Tactics
Longer payment terms
Warranties and service contracts
Discriminatory Pricing Time Product-form Customer Segment Location
Delayed quotation pricing
Reduction of discounts
Brand Leader Responses to Competitive Price Cuts
Maintain price and add value
Increase price and improve quality
Launch a low-price fighter line
MARKETING MANAGEMENT 12 th edition Chapter Designing and Managing Value Networks and Marketing Channels by Dr. Paitoon Chetthamrongchai ดร . ไพฑูรย์ เจตธำรงชัย [email_address] 081-989-0098
What is a Value Network and Marketing-Channel System?
Value Network : system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.
Marketing channel : sets of interdependent organizations involved in the process of making a product or service available for use or consumption.
Hybrid channel : multiplying the number of channels.
Ex. enables its customers to do transactions in branch offices, over the phone, or via the Internet
IBM’s sales force sells to large accounts, outbound telemarketing sells to medium-sized accounts, direct mail sells to small accounts, retailers sell to still smaller accounts, and the Internet to sell specialty items
What is a Value Network and Marketing-Channel System?
Channel integration characteristics:
Ability to order a product online, and pick it up at a convenient retail location: 7-11 in Japan
Ability to return an online-ordered product to a nearby store
Right to receive discounts based on total of online and off-line purchases
How a Distributor Effects an Economy of Effort
What Work is Performed by Marketing Channels?
Channel Functions and Flows
Key functions include:
Gather information about potential and current customers, competitors, and others
Develop and disseminate persuasive communications to stimulate purchasing
Reach agreements on price and other terms so that transfer of ownership or possession can be effected
Horizontal Marketing Systems: two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunities.
Multichannel Marketing Systems: occurs when a single firm use two or more marketing channels to reach one or more customer segment. Ex. CP, True, UBC
MARKETING MANAGEMENT 12 th edition Chapter Managing Retailing, Wholesaling, and Market Logistics by Dr. Paitoon Chetthamrongchai ดร . ไพฑูรย์ เจตธำรงชัย [email_address] 01-989-0098
Major Retailer Types Retailing Specialty Store : Narrow product line with a deep assortment. A clothing store would be a single-line store; a men’s clothing store would be a limited-line store; and a men’s custom-shirt store would be a superspecialty store. Examples: Athlete’s Foot, Tall Men, The Limited, The Body Shop. Department Store : Several product lines—typically clothing, home furnishings, and household goods—with each line operated as a separate department managed by specialist buyers or merchandisers. Examples : Sears, JCPenney, Nordstrom, Bloomingdale’s. Supermarket : Relatively large, low-cost, low-margin, high volume, self-service operation designed to serve total needs for food, laundry, and household products. Examples : Kroger, Food Emporium, Jewel. Convenience Store : Relatively small store located near residential area, open long hours, seven days a week, and carrying a limited line of high-turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee, soft drinks. Examples : 7-Eleven, Circle K.
Categories of nonstore retailing
Television direct-response marketing
Major Types of Retail Organizations Corporate Retailing Corporate Chain Store : Two or more outlets commonly owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise. Their size allows them to buy in large quantities at lower prices, and they can afford to hire corporate specialists to deal with pricing, promotion, merchandising, inventory control, and sales forecasting. Examples : Tower Records, GAP, Pottery Barn. Voluntary Chain : A wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. Examples : Independent Grovers Alliance (IGA), True Value Hardware, สหพัฒน์ Retailer Cooperative : Independent retailers who set up a central buying organization and conduct joint promotion efforts. Examples : Associated Grocers, ACE Hardware. Consumer Cooperative : A retail firm owned by its customers. In consumer coops residents contribute money to open their own store, vote on its policies, elect a group to manage it, and receive patronage dividends.
Trends in Retailing
New retail forms and combinations
Growth of intertype competition
Growth of giant retailers
Growing investment in technology
Global presence of major retailers
Selling an experience, not just goods
Competition between store-based and non-store-based retailing
Selling and promoting
Buying and assortment building
Management services and counseling
The Growth and Types of Wholesaling
Supply chain management (SCM):
involving procuring the right inputs, converting them effectively into finished products.
Helping the company identify superior supplier and distributors and help them improve productivity, which brings down the company’s costs.
involving planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to point of use.
Market logistic planning has four steps.
Deciding on the company’s value proposition to its customers
Deciding on the best channel design and network strategy for reaching the customers
Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management
Implementing the solution with the best information systems, equipment, policies, and procedures
Integrated logistics systems (ILS)
Major Logistics Functions Inventory When to order How much to order Just-in-time Costs Minimize Costs of Attaining Logistics Objectives Warehousing Storage Distribution Order Processing Received Processed Shipped Logistics Functions Transportation Rail, Truck, Water, Pipeline, Air
Goals of the Logistics System
Provide a Targeted Level of Customer Service at the Least Cost.
Maximize Profits , Not Sales.
Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels