Pricing, Distributing, and Promoting Products

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Chapter 11

Pricing, Distributing, and Promoting Products

Chapter Overview

A firm’s pricing decisions reflect the pricing objectives set by management. Some firms pursue the goal of maximizing profits, while others aim to maximize market share. Additional considerations include survival in a competitive market, social and ethical concerns, and image. Important price-setting approaches include cost-oriented pricing and breakeven analysis. For new products, pricing strategies include price skimming and penetration pricing, while tactics include price lining, psychological pricing, and discounting. E-commerce has reintroduced dynamic pricing to the U.S. marketplace, allowing sellers to alter prices on a consumer-by-consumer basis.

The ultimate goal of promotion is to increase sales, but other goals include communicating information, positioning a product, adding value, and controlling sales volume. Marketers must determine the promotional mix, which is the combination of tools to achieve promotional objectives. Possibilities include advertising, personal selling, sales promotion, and publicity and public relations. In determining the mix of tactics, marketers must consider the product itself, characteristics of the target audience, the buyer’s decision process, and the promotional mix budget.

In selecting a distribution mix, a firm may use all or any of eight distribution channels to distribute products only to consumers, to consumers and business customers, or only to business customers. Distribution intermediaries – merchant wholesalers, agents and brokers, and e-agents – help to distribute products. Retailers – product line retailers and bargain retailers – also facilitate distribution. Non-store retailing is a growing trend that includes mail-order marketing, telemarketing, electronic retailing, and direct selling.

Physical distribution includes all of the activities needed to move products from manufacturers to consumers, including customer service, warehousing, and transportation of products.

Chapter Objectives

1. Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 2. Explain the distribution mix and identify the different channels of distribution. 3. Identify the different types of retailing and retail stores. 4. Define physical distribution and describe the major activities in the physical distribution process. 5. Identify the important objectives of promotion, discuss the considerations in selecting a promotional mix, and describe the key advertising media. 6. Outline the tasks involved in personal selling and describe the types of sales promotions.

REFERENCE OUTLINE

Opening Case: Congested? Stuffed Up? Try DTC.

I. Determining Prices
A. Pricing to Meet Business Objectives
1. Profit-Maximizing Objectives
2. Market Share Objectives
B. Price-Setting Tools
1. Cost-Oriented Tools
2. Breakeven Analysis: Cost-Volume-Profit Relationships

II. Pricing Strategies and Tactics
A. Pricing Strategies
1. Pricing Existing Products
2. Pricing New Products
3. Fixed versus Dynamic Pricing for E-Business B. Pricing Tactics

III. The Distribution Mix
A. Intermediaries and Distribution Channels
1. Distribution of Consumer Products
a. Channel 1: Direct Distribution of Consumer Products b. Channel 2: Retail Distribution of Consumer Products c. Channel 3: Wholesale Distribution of Consumer Products d. Channel 4: Distribution Through Sales Agents or Brokers 2. The Pros and Cons of Nondirect Distribution a. Channel 5: Distribution by Agents...
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