This document discusses pricing objectives and strategies that companies can pursue, including survival, maximum current profit, maximum market share, and market skimming. It also covers determining demand curves and the factors that influence price sensitivity. Finally, it outlines the key considerations in selecting and managing marketing channels, such as identifying intermediaries, evaluating channel members, and the different types of power that can help manage channels.

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. 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. 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. 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. 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. 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. 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. 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.  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. 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. 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.  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.  Marketing channels are sets of interdependent
organisations involved in the process of makng a
product or service available for use or consumption

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.  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. 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.  Channel levels- Upto six levels :
1. Zero – level – direct level
2. One level – Retailer
3. Two level – Wholesaler and Retailer
4. Three level

18.  Service sector channels:
 Hospitals and schools

19.  Customers desired service output
levels:
1. Lot size
2. Waiting time
3. Spatial convenience
4. Product Variety
5. Service backup

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. 2. Number of intermediaries: Exclusive
distribution
i. Exclusive
ii. Selective
iii. Intensive

22.  Terms and responsibility of channel
partners:
 Each channel member must be
treated respectfully and given
opportunities to be profitable.

23.  Trade-relation mix:
1. Price policy
2. Conditions of sale
3. Territorial rights
4. Mutual services and responsibilities

24.  Evaluating channel members:
1. Economic
2. Control
3. Adaptive

25.  Channel management decisions:
1. Selecting channel members:
2. Training channel members
3. Motivating channel members: Channel
offering, Channel building programs

26.  Eliciting power to mange:
1. Coercive power
2. Reward power
3. Legitimate power
4. Expert power
5. Referent power