1. MARKETING MANAGEMENT 12 th edition C hapter 14 D eveloping P ricing S trategies and P rograms by Dr. Paitoon Chetthamrongchai . [email_address] 081-989-0098

2. 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

3. 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

4. Step 1: Selecting the Pricing Objective

• Survival

• Maximum current profit

• Maximum market share

• Maximum market skimming

• Product-quality leadership

5. Step 2: Determining Demand

• Price sensitivity

• Estimating demand curves

• Price elasticity of demand

Step 3: Estimating Costs

• Types of Costs

• Accumulated Production

• Activity-Based Cost Accounting

• Target Costing

6. Types of Costs Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production Fixed Costs (Overhead) Costs that dont vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials

7. Step 5: Selecting a Pricing Method

• Markup pricing

• Target-return pricing

• Perceived-value pricing

• Value pricing

• Going-rate pricing

• Auction-type pricing

Step 4: Analyzing competitor

8. 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

9. 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.

• Reference prices

• Price-quality inferences

• Price endings: 9/ 0/ 5

10. Price-Adaptation Strategies

• Geographical pricing

• Discounts/allowances

• Promotional pricing

• Differentiated pricing

11. Price-Adaptation Strategies

• Discounts/ Allowances

• Cash discount

• Quantity discount

• Functional discount

• Seasonal discount

• Allowance

12. Promotional Pricing Tactics

• Loss-leader pricing

• Special-event pricing

• Cash rebates

• Low-interest financing

• Longer payment terms

• Warranties and service contracts

• Psychological discounting

13. Discriminatory Pricing Time Product-form Customer Segment Location

14. Increasing Prices

• Delayed quotation pricing

• Escalator clauses

• Unbundling

• Reduction of discounts

15. Brand Leader Responses to Competitive Price Cuts

• Maintain price

• Maintain price and add value

• Reduce price

• Increase price and improve quality

• Launch a low-price fighter line

16. MARKETING MANAGEMENT 12 th edition Chapter Designing and Managing Value Networks and Marketing Channels by Dr. Paitoon Chetthamrongchai . [email_address] 081-989-0098

17. 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

• • • • IBMs 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

18. 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

19. How a Distributor Effects an Economy of Effort

20. 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

• • • Place orders with manufacturers

21. Five Marketing Flows in the Marketing Channel

22. What Work is Performed by Marketing Channels?

• Channel levels

• • Zero-level channel (a.k.a. direct-marketing channel)

• • One-level channel

• • Two-level channel

• • Three-level channel

• • Reverse-flow channel: reusing

• Service Sector Channels

• Information Highway Channels

23. Consumer and Industrial Marketing Channels

24. Channel-Design Decisions

• Major Channel Alternatives

• • Types of Intermediaries

• • Number of Intermediaries

• • • Exclusive distribution

• • • Selective distribution

• • • Intensive distribution

25. Channel Dynamics

• Distribution channels do not stand still.

• New wholesaling and retailing institutions emerge

• and new channel evolve.

• • Vertical Marketing Systems

• • • Conventional marketing channel

• • • Vertical marketing systems (VMS)

• • • • Corporate and Administered VMS: combines successive stages of production and distribution under single ownership.

• • • • Contractual VMS

• • • • • Wholesaler-sponsored voluntary chains/ Retailer cooperatives/ Franchise organizations

26. Channel Dynamics

• The New Competition in Retailing

• • 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

27. MARKETING MANAGEMENT 12 th edition Chapter Managing Retailing, Wholesaling, and Market Logistics by Dr. Paitoon Chetthamrongchai . [email_address] 01-989-0098

28. Major Retailer Types Retailing Specialty Store : Narrow product line with a deep assortment. A clothing store would be a single-line store; a mens clothing store would be a limited-line store; and a mens custom-shirt store would be a superspecialty store. Examples: Athletes Foot, Tall Men, The Limited, The Body Shop. Department Store : Several product linestypically clothing, home furnishings, and household goodswith each line operated as a separate department managed by specialist buyers or merchandisers. Examples : Sears, JCPenney, Nordstrom, Bloomingdales. 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.

29. Retailing

• Nonstore retailing

• Categories of nonstore retailing

• • Direct selling

• • Direct marketing

• • • Telemarketing

• • • Television direct-response marketing

• • • Electronic shopping

• • Automatic vending

• • Buying service

• Corporate Retailing

30. 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, 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.

31. Retailing

• 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

32. Wholesaling

• Wholesalers functions:

• • • Selling and promoting

• • • Buying and assortment building

• • • Bulk breaking

• • • Warehousing

• • • Transportation

• • • Financing

• • • Risk bearing

• • • Market information

• • • Management services and counseling

• The Growth and Types of Wholesaling

33. Market Logistics

• 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 companys costs.

34. Market Logistics

• Market logistics:

• • 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 companys 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)

35. Market Logistics

• Market-logistics Decisions

• • Order Processing

• • Warehousing

• • Inventory

• • Transportation

36. 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

37. 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